< Back This window shows your responses and what was marked correct and incorrect from y Paste 15 A research analyst is trying to determine whether a firm's price-earnings (PE) and price-sales (PS) ratios can explain the firm's stock performance over the past year. A PE ratio is calculated as a firm's share price compared to the income or profit earned by the firm per share. Generally, a high PE ratio suggests that investors are expecting higher earnings growth in the future compared to companies with a lower PE ratio. The PS ratio is calculated by dividing a firm's share price by the firm's revenue per share for the trailing 12 months. In short, investors can use the PS ratio to determine how much they are paying for a dollar of the firm's sales rather than a dollar of its earnings (PE ratio). In general, the lower the PS ratio, the more attractive the investment. The accompanying table shows a portion of the year-to-date returns (Return in %) and the PE and PS ratios for 30 firms. 1.25/10 points awarded Scored Firm 1 2 Return 4.6 -4.1 PE PS 14.39 2.45 11.05 0.78 30 16.3 13.93 1.92 Click here for the Excel Data File a-1. Estimate: Return = 0 + BPE + B2PS + . (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) Predicted Return = a-2. Are the signs on the coefficients as expected? Yes No b. Interpret the slope coefficient of the PS ratio. PE + PS As the PS ratio increases by 1 unit, the predicted return of the firm increases by 3.37%, holding PE constant. As the PS ratio decreases by 1 unit, the predicted return of the firm decreases by 5.37%, holding PE constant. As the PS ratio increases by 1 unit, the predicted return of the firm decreases by 3.37%, holding PE constant. As the PS ratio increases by 1 unit, the predicted return of the firm decreases by 4.39%, holding PE constant. c. What is the predicted return for a firm with a PE ratio of 10 and a PS ratio of 2? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round final answer to 2 decimal places.) Predicted Return d. What is the standard error of the estimate? (Round your answer to 2 decimal places.) Standard error e. Interpret R. 40.14% of the sample variation in y is explained by the sample regression equation. 40.14% of the sample variation in x is explained by the sample regression equation. 63.36% of the sample variation in x is explained by the sample regression equation. 35.71% of the sample variation in y is explained by the sample regression equation. Calibri (Body) 11 A^ B I U Open recovered workbooks? Your recent changes we F4 fx A B C D E F 1 Firm 10 9 234565 23456789: 1 Return 4.6 PE PS 14.39 2.45 -4.1 11.05 0.78 5.9 11.97 2.23 5 11.31 1.37 -11.6 9.84 1.85 20.7 15.63 0.83 64.3 16.07 1.63 68 18.7 8.97 1.02 -15.4 11.37 2.76 11 10 48.1 13.71 1.46 12 11 7.1 11.49 1.21 13 12 21.2 14.36 1.28 14 13 -18 8.21 0.79 15 14 2.9 9.49 2.71 16 15 12.1 11.19 2 17 16 -4.1 12.64 2.77 18 17 2.1 9.66 2.03 19 18 16.1 13.49 1.12 20 19 23.1 14.95 3.36 21 20 -1.4 8.95 2.41 22 21 -8.2 10.57 3.68 23 22 -3.6 7.9 2.23 24 23 15.6 16.38 4.57 25 24 21.4 16.29 0.91 26 25 6.1 15.07 2.31 27 26 11.5 9.17 1.01 28 27 13.6 14.95 1.39 29 28 15.9 15.57 0.94 30 29 0.7 12.56 0.45 31 30 16.3 13.93 1.92 32 33 34 35 36 Return +