A Researcher Is Studying the Effect of Ten Different Variables

question 60

Multiple Choice

A researcher is studying the effect of ten different variables on a critical measure of business performance. A multiple regression analysis including all ten variables is performed. What criterion could be used to eliminate one of the ten variables?

• A) Multiple R².
• B) Largest p-value.
• C) Smallest p-value.
• D) Smallest regression coefficient.

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Definitions:

Pre-Tax Cash Flow

The amount of cash that a company generates before accounting for taxes, used in evaluating its financial performance.

WACC

Weighted Average Cost of Capital; a calculation of a firm's cost of capital where each category of capital is proportionately weighted.

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary based on income level, type of income, and jurisdiction.

Decision Tree

A form of scenario analysis in which different actions are taken in different scenarios.