SCENARIO 14-20-A
You Are the CEO of a Dairy Company $\left( X _ { 1 } \right)$

question 252

Multiple Choice

SCENARIO 14-20-A
You are the CEO of a dairy company. You are planning to expand milk production by purchasing
additional cows, lands and hiring more workers. From the existing 50 farms owned by the company,
you have collected data on total milk production (in liters) , the number of milking cows, land size (in
acres) and the number of laborers. The data are shown below and also available in the Excel file
Scenario14-20-DataA.XLSX.
S
You believe that the number of milking cows $\left( X _ { 1 } \right)$ , land size $\left( X _ { 2 } \right)$ and the number of laborers $\left( X _ { 3 } \right)$ are the best predictors for total milk production on any given farm.
-Referring to Scenario 14-20-A, which of the following is a correct interpretation for the adjusted r-square?

• A) 89.50% of the total variation in total milk production can be explained by the number of milking cows, the land size and the number of laborers.
• B) 89.50% of the total variation in total milk production can be explained by the number of milking cows, the land size and the number of laborers after adjusting for the level of Significance
• C) 89.50% of the total variation in total milk production can be explained by the number of milking cows, the land size and the number of laborers holding constant the effect of all The independent variables.
• D) 89.50% of the total variation in total milk production can be explained by the number of milking cows, the land size and the number of laborers after adjusting for the number of Predictors and sample size.

---

Definitions:

Bankruptcy Costs

Expenses associated with the process of declaring and handling bankruptcy, including legal fees, administrative fees, and potential losses to creditors.

Miller and Modigliani

Refers to the theorem proposed by Franco Modigliani and Merton Miller, indicating that under certain market conditions, the valuation of a company is unaffected by its capital structure.

Debt Financing

The method of raising capital through borrowing, typically through loans or by issuing bonds.

Financial Leverage

Financial leverage involves using borrowed funds to increase the potential return on investment; however, it also increases the potential risk of loss if the investments do not perform well.