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

question 161

Multiple Choice

SCENARIO 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 2 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit ( X₁ ) and the amount of insulation in inches ( X ₂ ) . Given below is EXCEL output of the regression model.



Also SSR (X₁ | X₂) = 8343.3572 and SSR (X₂ | X₁) = 4199.2672
-Referring to Scenario 14-5,at the 0.01 level of significance,what conclusion should the microeconomist reach regarding the inclusion of Capital in the regression model?

• A)Capital is significant in explaining corporate sales and should be included in the model because its p-value is less than 0.01.
• B)Capital is significant in explaining corporate sales and should be included in the model because its p-value is more than 0.01.
• C)Capital is not significant in explaining corporate sales and should not be included in the model because its p-value is less than 0.01.
• D)Capital is not significant in explaining corporate sales and should not be included in the model because its p-value is more than 0.01.

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Definitions:

Working Capital

The variance between a firm's immediate assets and its short-term obligations.

Accumulated Depreciation

The total depreciation of an asset over its life up to a specific point in time, reflecting how much of its value has been used up.

Accounts Payable

Accounts payable represent a company's obligation to pay off a short-term debt to its creditors or suppliers.

Accounts Receivable

The funds that customers owe to a business for products or services already provided but not yet compensated for.