Your Textbook Discussed the Regression Model When X Is a Binary

question 29

Essay

Your textbook discussed the regression model when X is a binary variable $$Y _ { i } = \beta _ { 0 } + \beta _ { 1 } D _ { i } + u _ { i } , i = 1 , \ldots , n$$ Let $Y$ represent wages, and let $D$ be one for females, and 0 for males. Using the OLS formula for the slope coefficient, prove that $\widehat { \beta } _ { 1 }$ is the difference between the average wage for males and the average wage for females.

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Definitions:

Independent Projects

Projects within a financial or business context that do not affect each other's outcomes or viability.

Multiple IRR Projects

Investment projects that, due to their cash flow structure, yield more than one internal rate of return, complicating the investment decision.

Discounted Cash Flow

A valuation method used to estimate the attractiveness of an investment opportunity, by calculating the present value of expected future cash flows.

Discounted Payback

A capital budgeting method that calculates the amount of time needed to recoup an investment based on its discounted cash flows.