Listed Below Is Data on Profit and Market Capitalization for a Sample

question 36

Essay

Listed below is data on profit and market capitalization for a sample of 15 different firms in U.S. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Profits (\$ } \\\text { millions) } \boldsymbol { y }\end{array} & \begin{array} { c } \text { Market Capitalization } \\\text { (\$ millions) } \boldsymbol { x }\end{array} \\\hline 296.2 & 1,936.9 \\\hline - 25 & 1,171.8 \\\hline 4,085 & 55,135.8 \\\hline 6,558 & 97,417.2 \\\hline 12,525 & 95,198.9 \\\hline 3,394 & 53,579.7 \\\hline 442.8 & 12,466.3 \\\hline 633.1 & 8,894.3 \\\hline 3,528 & 65,872.4 \\\hline 2,698 & 25,661.3 \\\hline 1,200.65 & 19,854.7 \\\hline 11.987 & 195,643.8 \\\hline 641.8 & 10,447.8 \\\hline 5,043 & 66,695.5 \\\hline 5,206 & 53,558.4 \\\hline\end{array}$$
a. Develop a scatter chart for the above data. What does this chart indicate about the relationship between market capitalization and profit?
b. Use the data to develop an estimated regression equation that could be used to estimate a firm's profit based on its market capitalization. What is the estimated regression model?
c. What is the predicted profit for the market capitalization of 70,721.3 (million)?

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Definitions:

Commonsense Notions

Widely held beliefs or judgments that are seen as innate to human cognition without the need for detailed empirical evidence.

Bureaucracies

Organizational structures that manage large-scale public and private operations, characterized by a hierarchical arrangement, a division of labor, and a set of formal rules and procedures.

Formal Organization

An organization structured with fixed rules and regulations, clearly defined roles and responsibilities, and a hierarchical authority system.

Reference Group

A group that individuals compare themselves to for the purpose of evaluating their behaviors, attitudes, and norms.