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Steve Douglas has been hired as a management trainee by a large brokerage firm. As his first project, he is asked to study the gross

Steve Douglas has been hired as a management trainee by a large brokerage firm. As his first project, he is asked to study the gross profit of firms in the chemical industry. What factors affect profitability in that industry? Steve selects a random sample of 16 firms and obtains data on the number of employees, number of consecutive common stock dividends paid, the total value of inventory at the start of the current year, and the gross profit for each firm. His findings are as follows:

CompanyGross Profit ($000), yNumber of Employees, x1Consecutive Dividends, x2Beginning Inventory, x3
12800140121800
213008521320
3123013042920
416001158096
545003901203600
65700670648450
7325020543598
86409014870
93470480885550
106700810989875
1137001204406500
1264405901109130
131280440381200
144160280241890
153870650601200
16980250441300


A. Determine the regression equation. The Master Chemical Company employs 220 people, has paid 64 consecutive common stock dividends, and has an inventory valued at $1 500 000 at the start of the year. What is the estimate of the gross profit?

B. Conduct a global test of hypothesis to determine whether any of the net regression coefficients differ from zero. Test at a significance level of 0.05.

C. Conduct a test of hypothesis for the individual regression coefficients. Would you consider deleting any of the independent variables? Test at a significance level of 0.05.

D. If your conclusion in part (c) was to delete one or more independent variables, run the regression equation again, deleting those variables.

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SUMMARY OUTPUT Regression Statistics Multiple R 0884019604 R Square 0781490661 Adjusted R Square 0726863326 Standard Error 1025479651 Observations 16 ... blur-text-image

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