A finance executive would like to determine if a relationship exists between the current earnings per share (EPS) of a bank and the following independent variables:

• Total assets ($ billions)

• Previous period’s EPS

• Previous period’s return on average assets (ROAA)

• Previous period’s return on average equity (ROAE)

ROAA measures how effectively assets are utilized, and ROAE measures a firm’s profitability. The Excel file Bank EPS. xlsx contains these data for several banks.

a. Using PH_Stat, check for the presence of multicollinearity.

b. If multicollinearity is present, take the necessary steps to eliminate it.

c. Perform a general stepwise regression using α = 0.05 for the p value to enter and to remove independent variables from the regression model.

d. Identify the regression equation for the model in part c.

e. Perform a residual analysis with the model in part c to verify that the conditions for the model are met.