TABLE 16-13 A Local Store Developed a Multiplicative Time-Series Model to Forecast

question 164

Multiple Choice

TABLE 16-13
A local store developed a multiplicative time-series model to forecast its revenues in future quarters, using quarterly data on its revenues during the 4-year period from 1998 to 2002. The following is the resulting regression equation:
log₁₀Y^{^} = 6.102 + 0.012 X - 0.129 Q₁ - 0.054 Q₂ + 0.098 Q₃
where
Y^{^} is the estimated number of contracts in a quarter
X is the coded quarterly value with X = 0 in the first quarter of 1998.
Q₁ is a dummy variable equal to 1 in the first quarter of a year and 0 otherwise.
Q₂ is a dummy variable equal to 1 in the second quarter of a year and 0 otherwise.
Q₃ is a dummy variable equal to 1 in the third quarter of a year and 0 otherwise.
-Referring to Table 16-13, the best interpretation of the coefficient of Q₂ (- 0.054) in the regression equation is

• A) the revenues in the second quarter of a year is approximately 5.4% lower than it would be during the fourth quarter.
• B) the revenues in the second quarter of a year is approximately 5.4% lower than the average over all 4 quarters.
• C) the revenues in the second quarter of a year is approximately 11.69% lower than the average over all 4 quarters.
• D) the revenues in the second quarter of a year is approximately 11.69% lower than it would be during the fourth quarter.

Evaluate strategies for improving comprehension and knowledge retention.

Understand the principles of Modigliani & Miller (M&M) Propositions I & II without taxes, specifically regarding the irrelevance of capital structure.

Comprehend the effect of leverage on the cost of equity according to M&M Proposition II with no taxes.

Grasp the impact of debt financing on a firm's value and the cost of capital when taxes are considered.

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Definitions:

Neo-Freudians

Psychologists who were influenced by Freud's theories but developed their own distinct approaches and theories, often diverging from Freud's emphasis on sexual motivation.

Freud

Sigmund Freud, originating from Austria and a neurologist by profession, developed psychoanalysis as a technique for addressing psychopathology through discussions between a psychoanalyst and their patient.

Weak Superegos

Refers to individuals with underdeveloped or ineffective superegos, resulting in difficulties in regulating impulses and adhering to societal norms and morals.

Karen Horney

A German psychoanalyst known for her theories on neurosis, personality development, and the concept of "basic anxiety."