Question

In: Statistics and Probability

In this problem we use Regression Analysis to test the hypothesis that Dividends per share significantly...

In this problem we use Regression Analysis to test the hypothesis that Dividends per share significantly affects price per share of a company.

Coefficients(a)

Model		Unstandardized Coefficients		Standardized Coefficients	t	Sig.
		B	Std. Error	Beta	B	Std. Error
1	(Constant)	26.805	3.922		6.835	.000
	Dividends Per Share Paid	2.408	.328	.811	7.345	.000

a Dependent Variable: Price Per Share of Company Stock

Model Summary

Model	R	R Square	Adjusted R Square	Std. Error of the Estimate
1	.811(a)	.658	.646	9.683

a Predictors: (Constant), Dividends Per Share Paid

Using the SPSS results above, state the Regression Equation (Model) for this problem)

If an asset does not pay dividends, what will be the price of the asset?

If an asset pays $3.75 per share, what will be the price of the asset?

State the Null and Alternate Hypothesis that Dividends per Share may or may not affect the Price per Share for a company

What is the Critical Z value for the test at .01 Level of Significance?

What is your conclusion? Explain your answer.

Expert Solution

Please don't hesitate to give a "thumbs up" for the answer in case the answer has helped you

a.

Answer: y^ = 26.805 + 2.408*x, where

y^ = predicted price per share of company stock
x = dividents per share paid

b.

If an asset does not pay dividends, what will be the x = 0, then:

Price of the asset
y^ = 26.805 + 2.408*x, where x = 0
y^ = 26.805 + 2.408*0
y^ = $26.805

Answer: $26.805

c.

If an asset pays $3.75 dividends, what will be the x = 0, then:

Price of the asset
y^ = 26.805 + 2.408*3.75
y^ = $35.835

Answer: $35.835

d.

Answer:

Null hypothesis: dividends per share paid = 0
Alternate hypothesis: dividends per share paid != 0 ( please note the not equal to sign)

e.

Critical Z for .01 is +2.5758 ( used the Z table to find the find cumulative of (1- .01/2) because it is essentially a 2 tailed test, so .01 is divided into 2 tails)

Answer: +2.5758

f.

Answer:

Conclusion: Our test-statistic is 2.408 ( check unstandardized coefficient for Dividends per share paid), is is less than 2.5758 ( critical Z calculated in part e above). It is not in critical region hence we fail to reject the null hypothesis,

Divident per Share Paid does not have a statistically significant linear relation with Price per share of company stock

orchestra answered 2 years ago

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