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:

Cash Rebates

Refunds offered to consumers as an incentive to purchase a product or service.

Inelastic Supply

Characterizes a situation where the quantity supplied of a good is not significantly changed by the price of that good.

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Objects of considerable age valued for their artistic, historical, or collectible qualities.

Pricing Power

The ability of a company or an entity to dictate the price of its goods or services without losing market share to competitors.