TABLE 14-6 One of the Most Common Questions of Prospective House Buyers

question 208

Multiple Choice

TABLE 14-6
One of the most common questions of prospective house buyers pertains to the cost of heating in dollars (Y) . To provide its customers with information on that matter, a large real estate firm used the following 4 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit (X₁) the amount of insulation in inches (X₂) , the number of windows in the house (X₃) , and the age of the furnace in years (X₄) . Given below are the Excel outputs of two regression models.
Model 1

Model 2

-Referring to Table 14-6, what can we say about Model 1?

• A) The model explains 77.7% of the sample variability of heating costs; after correcting for the degrees of freedom, the model explains 75.1% of the sample variability of heating costs.
• B) The model explains 75.1% of the sample variability of heating costs; after correcting for the degrees of freedom, the model explains 77.7% of the sample variability of heating costs.
• C) The model explains 80.8% of the sample variability of heating costs; after correcting for the degrees of freedom, the model explains 75.7% of the sample variability of heating costs.
• D) The model explains 75.7% of the sample variability of heating costs; after correcting for the degrees of freedom, the model explains 80.8% of the sample variability of heating costs.

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Definitions:

Consolidated Income Statement

A consolidated income statement is a financial statement that aggregates the financial performance of a company and its subsidiaries.

Net Income

The amount of profit remaining in a company after all expenses, taxes, and costs have been subtracted from total revenue.

Accrual-Based Net Income

The net income of a company calculated based on accrual accounting, recognizing revenues when earned and expenses when incurred, regardless of cash flow.

IntrA-Entity Gains

Profits resulting from transactions within the same entity, often requiring elimination during the consolidation process to avoid inflating earnings.