Assuming That a Regression Has Been Conducted for a Group

question 119

Multiple Choice

Assuming that a regression has been conducted for a group of small companies where x = the number of employees at the company,y = annual revenue of the company (recorded in thousands of dollars) ,and the largest company included in the study had 82 employees.The resulting regression equation is = 59.2 + 83.4x.Which of the following is true?

• A)For each additional employee,revenue on average will increase by $83.4
• B)A company with 2100 employees could be predicted to have average revenue of about $175 million.
• C)For each additional employee,revenue on average will increase by $59.2 thousand.
• D)This model should not be used to make predictions for companies with more than 82 employees.

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Definitions:

Risk Premium

The additional return expected for investing in a risky asset over a risk-free asset.

Dividend Per Share

The sum of declared dividends for every common share issued, divided by the total number of shares outstanding.

Free Cash Flow

The net cash flow a business produces following the deduction of operational expenses and investment in maintaining its fixed assets.

Interest Expense

The cost incurred by an entity for borrowed funds, typically reported on the income statement.