PROFIT	RISK	RD
396	8.5	132.58
130	7.5	81.928
508	10	145.992
172	8	90.02
256	7	114.408
32	7.5	53.704
102	7	76.244
102	8	71.68
536	9.5	151.592
102	7.5	74.816
214	6	108.752
200	8.5	92.372
158	7	92.26
32	6.5	60.732
116	7.5	78.12
120	5.5	90
270	9	105.532
270	8	111.832

Profit Forecasting: A company is interested in predicting profit for a number of projects based on two explanatory variables: a measure of risk assigned at the outset of the project (X1 = RISK) and the expenditure on research and development for the project (X2 = RD). Data on the three variables PROFIT, RISK, and RD are available in the worksheet entitled RD5. PROFIT is measured in thousands of dollars and RD is measured in hundreds of dollars. Use the data to fit two separate regression models. For the first model (Linear Model AKA First Order Model), regress PROFIT on the two explanatory variables RISK and RD. (Hint: "Regress PROFIT on x" implies that PROFIT is the y variable and x is the explanatory variable.) c) Provide summary measures about the two models. (Enter your R2 values as percents to two decimal places and enter your standard errors to three decimal places.) Model R2 Radi Se Linear Model % % Second-Order Model % % d) Choose the model you prefer for PROFIT and provide a justification for your choice. The first-order model is better because the Radj is higher and the standard error is lower. The second-order model is better because the Radj is higher and the standard error is lower. The first-order model is better because the Rd; is lower and the standard error is higher. The second-order model is better because the Radj is lower and the standard error is higher. Regardless of your decision above, use the Second Order Model to answer ALL of the questions below. Also, be sure to compute these values based on the UNROUNDED values in EXCEL. e) Predict the profit for a project with a risk of 9.0 and a research and development expenditure of $7,000. (Enter your answers to two decimal places.) $ f) Predict the profit for a project with a risk of 8.0 and a research and development expenditure of $10,000. (Enter your answers to two decimal places.) $ Profit Forecasting: A company is interested in predicting profit for a number of projects based on two explanatory variables: a measure of risk assigned at the outset of the project (X1 = RISK) and the expenditure on research and development for the project (X2 = RD). Data on the three variables PROFIT, RISK, and RD are available in the worksheet entitled RD5. PROFIT is measured in thousands of dollars and RD is measured in hundreds of dollars. Use the data to fit two separate regression models. For the first model (Linear Model AKA First Order Model), regress PROFIT on the two explanatory variables RISK and RD. (Hint: "Regress PROFIT on x" implies that PROFIT is the y variable and x is the explanatory variable.) c) Provide summary measures about the two models. (Enter your R2 values as percents to two decimal places and enter your standard errors to three decimal places.) Model R2 Radi Se Linear Model % % Second-Order Model % % d) Choose the model you prefer for PROFIT and provide a justification for your choice. The first-order model is better because the Radj is higher and the standard error is lower. The second-order model is better because the Radj is higher and the standard error is lower. The first-order model is better because the Rd; is lower and the standard error is higher. The second-order model is better because the Radj is lower and the standard error is higher. Regardless of your decision above, use the Second Order Model to answer ALL of the questions below. Also, be sure to compute these values based on the UNROUNDED values in EXCEL. e) Predict the profit for a project with a risk of 9.0 and a research and development expenditure of $7,000. (Enter your answers to two decimal places.) $ f) Predict the profit for a project with a risk of 8.0 and a research and development expenditure of $10,000. (Enter your answers to two decimal places.) $