Here is question 1 and the answers:

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

here

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

A.

Scatter Plot:

SUMMARY OUTPUT Regression Statistics Multiple R 0.638336066 R Square 0402422933 Adjusted R Square 0.38322185 Standard Error 322.2666306 Observations 2? ANDVA a'f SS MS F Significance F Regression 1 2382532.3 23825323 1119216538 0.000339955 Residual 25 3464561.10? 138582.4443 Total 26 584209340? Coefficients Standard Error t Stat Puaiue Lower 95% 8404531226 184255292? Intercept Sales 118.0638265 4.443801931 0211863101 0483140156 Upper959 o -159.111?88 3212024225 4.146343615 0.000339955 9.2?334836? 22.52221116 Profits vs Sales 1800 1600 1400 1200 1000 Profits 800 600 400 200 10 20 30 40 50 60 70 Sales