Question

In: Statistics and Probability

Steve Douglas has been hired as a management trainee by a large brokerage firm. As his...

Steve Douglas has been hired as a management trainee by a large brokerage firm. As his first project, he is asked to study the gross profit of firms in the chemical industry. What factors affect profitability in that industry? Steve selects a random sample of 16 firms and obtains data on the number of employees, number of consecutive common stock dividends paid, the total value of inventory at the start of the current year, the gross profit for each firm and foreign owner . His findings are as follows:

C o m p a n y

Gross

Profit ($000), y

Number of Employees , x1

Consecutive Dividends, x2

Beginning Inventory ($000 ), x3

Foreign owner, x4

1

$2800

140

12

$1800

Yes

2

1300

65

21

320

Yes

3

1230

130

42

820

No

4

1600

115

80

76

No

5

4500

390

120

3600

Yes

6

5700

670

64

8400

Yes

7

3150

205

43

508

Yes

8

640

40

14

870

Yes

9

3400

480

88

5500

No

10

6700

810

98

9875

No

11

3700

120

44

6500

No

12

6440

590

110

9130

No

13

1280

440

38

1200

No

14

4160

280

24

890

No

15

3870

650

60

1200

Yes

16 980 150 24 1300 No

C. Determine the regression equation. The Master Chemical Company employs 220 people, has paid 64 consecutive common stock dividends, has an inventory valued at $1 500 000 at the start of the year and foreign owner. What is the estimate of the gross profit?

D.Conduct a global test of hypothesis to determine whether any of the regression coefficients differ from zero. Test at a significance level of 0.05.

E. Conduct a test of hypothesis for the individual regression coefficients. Would you consider deleting any of the independent variables? Test at a significance level of 0.05.

F. If your conclusion in part (c) was to delete one or more independent variables, run the regression equation again, deleting those variables.

Provide step by step solution on excel.

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