Use the Following to Answer the Questions Below

question 37

Multiple Choice

Use the following to answer the questions below.
The following is output from regression analysis performed to develop a model for predicting a firm's Price-Earnings Ratio (PE) based on Growth Rate, Profit Margin, and whether or not the firm is Green (1 = Yes, 0 = No) .
-Which of the following is the correct interpretation for the regression coefficient of Green?

• A) The regression coefficient indicates that the PE ratio of a firm that is green will, on average, be 2.09 points higher than a firm that is not green with the same profit growth rate and profit margin.
• B) The regression coefficient indicates that the PE ratio of a firm that is green will, on average, be 2.09 points lower than a firm that is not green with the same profit growth rate and profit margin.
• C) The regression coefficient indicates that the PE ratio of a firm that is green will, on average, be 2.09 times higher than a firm that is not green.
• D) The regression coefficient indicates that the PE ratio of a firm that is green will, on average, be 2.09 times lower than a firm that is not green.
• E) The regression coefficient is not significantly different from zero.

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Definitions:

Unit-level Costs

Expenses directly tied to the production of individual units, including costs of materials and labor directly involved in product creation.

Plantwide Overhead Rates

A single overhead rate calculated using the total costs for an entire facility divided by the total number of units produced or another appropriate base, used to allocate overhead costs to products.

Departmental Overhead Rates

A method of allocating indirect costs to specific departments based on relevant criteria, such as labor hours or machine hours.

Batch-level Costs

Expenses that are incurred for every batch produced, regardless of the size of the batch, such as setup costs or inspection fees.