1. Data 3-10 has cross sectional data on total 1995 sales and profits for 27 German companies. Use Excel to estimate the model (in other words, run the regression): Profits_i = _i + SALES_i + _i

a. Draw a scatter plot with profits on the Y axis. Compute the R2 from the Excel regression printout. Is the regression line a good fit for the data? Explain what variable you are looking at to arrive at your conclusion.

b. In one or two sentences, state what the regression results imply about the relationship between profits and sales. Do the results coincide with what you expected? Explain.

c. Based on the Significance F, is the overall regression statistically significant from zero? Explain how you arrived at that conclusion.

d. Is the coefficient of Sales statistically significant (from zero)? Explain how you arrived at that conclusion.

DATA 3-10:

profits:

629

1214

1254

1567

1119

711

1618

180

183

349

232

453

757

168

238

118

191

490

211

163

90

243

145

168

160

90

26

sales:

36.617

58.112

43.421

29.186

34.16

41.628

30.265

16.892

1.199

21.011

57.69

30.21

27.69

3.706

9.295

5.861

12.332

25.613

5.423

3.042

9.952

17.253

3.499

12.178

2.292

13.901

17.747