Which of the Following Statements About Collinearity in a Multiple

question 8

Multiple Choice

Which of the following statements about collinearity in a multiple regression model is false?

• A)The Variance Inflation Factor can measure the collinearity of a predictor variable.
• B)Coefficients of predictor variables will not be affected by collinearity.
• C)Collinearity should be suspected if a model has a high R² and large F but no significant predictor variables.
• D)All predictors must be considered in determining collinearity in a multiple regression model.
• E)None of these are false.

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Definitions:

Operating Merger

Occurs when the operations of two companies are integrated with the expectation of obtaining synergistic gains. These may occur due to economies of scale, management efficiency, or a host of other reasons.

Synergy

Occurs when the whole is greater than the sum of its parts. When applied to mergers, a synergistic merger occurs when the postmerger earnings exceed the sum of the separate companies’ pre-merger earnings.

Pro Forma Cash Flows

Projected cash inflows and outflows that are expected to occur as a result of a proposed financial decision or investment.

Hostile Takeover

An acquisition attempt by a company or individual without the consent or cooperation of the target company's board of directors.