The Following Is Output from Regression Analysis Performed to Develop $\mathrm { PE } = 8.04 + 0.757$

question 31

Multiple Choice

The following is output from regression analysis performed to develop a model
For predicting a firm's Price-Earnings Ratio (PE) based on Growth Rate, Profit Margin,
And whether or not the firm is Green (1 = Yes, 0 = No) . At = .05 we can conclude that
? The regression equation is
$\mathrm { PE } = 8.04 + 0.757$ Growth Rate $+ 0.0516$ Profit Margin $+ 2.09$ Green?

$\begin{array} { l r r r r } \text { Predictor } & \text { Coef } & \text { SE Coef } & \text { T } & \text { P } \\ \text { Constant } & 8.043 & 1.570 & 5.12 & 0.000 \\ \text { Growth Rate } & 0.7569 & 0.1355 & 5.59 & 0.000 \\ \text { Profit Margin } & 0.05162 & 0.03239 & 1.59 & 0.139 \\ \text { Green? } & 2.0900 & 0.7945 & 2.63 & 0.023 \end{array}$

$S = 1.12583 \quad \mathrm { R } - \mathrm { Sq } = 87.8\%$

• A) Growth Rate is not a significant variable in predicting a firm's PE ratio.
• B) Profit Margin is a significant variable in predicting a firm's PE ratio.
• C) The regression coefficient associated with Growth Rate is not significantly different from zero.
• D) Whether or not a firm is Green is significant in predicting its PE ratio.
• E) The regression coefficient associated with Profit Margin is significantly different

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Definitions:

Real GDP

Gross Domestic Product adjusted for inflation, providing a more accurate representation of an economy's size and growth.

Inflation

The rate at which the general level of prices for goods and services is rising, leading to a decrease in the purchasing power of money.

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, used to gauge inflation or deflation.

Producer Price Index

An economic indicator that measures the average change over time in the selling prices received by domestic producers for their output.