Question 26 (3 points) You are interested in using regression analysis to predict your firm's monthly profits using the total number of stores the firm has and the amount they spend on advertising. You use monthly data for the past ten years to obtain the following estimates for the two models below. Please note the variable descriptions for the units each variable is measured in. Variable Descriptions In(profit): the natural log of the firm's total monthly profits. Profit: the firm's total monthly profits measured in $1,000s. Stores: the total number of stores the firm has operating. Advertising: the total amount the firm spends on advertising each month measured in dollars. Model 1: In(Profit) = 3.65 + 0.16(Stores) + 0.00009(Advertising) Goodness of Fit Measures from Excel: R2 = 0.29, Adjusted R2 = 0.28, Se = 1.79 Model 2: Profit = 852.03 + 236.25(Stores) + 0.00025(Advertising) Goodness of Fit Measures from Excel: R2 = 0.26, Adjusted R2 = 0.23, Se = 105.25 For model 1, suppose you go through the necessary steps in Excel and find a correlation (r) between the predicted profits and the actual profits to be 0.52. Based on the information above, which of the following statements is TRUE? Question 26 (3 points) You are interested in using regression analysis to predict your firm's monthly profits using the total number of stores the firm has and the amount they spend on advertising. You use monthly data for the past ten years to obtain the following estimates for the two models below. Please note the variable descriptions for the units each variable is measured in. Variable Descriptions In(profit): the natural log of the firm's total monthly profits. Profit: the firm's total monthly profits measured in $1,000s. Stores: the total number of stores the firm has operating. Advertising: the total amount the firm spends on advertising each month measured in dollars. Model 1: In(Profit) = 3.65 + 0.16(Stores) + 0.00009(Advertising) Goodness of Fit Measures from Excel: R2 = 0.29, Adjusted R2 = 0.28, Se = 1.79 Model 2: Profit = 852.03 + 236.25(Stores) + 0.00025(Advertising) Goodness of Fit Measures from Excel: R2 = 0.26, Adjusted R2 = 0.23, Se = 105.25 For model 1, suppose you go through the necessary steps in Excel and find a correlation (r) between the predicted profits and the actual profits to be 0.52. Based on the information above, which of the following statements is TRUE