Suppose the following is the true population model of the effect of Return on Assets (ROA) on CEO salary: Annual CEO Salary = 0 + 1Annual ROA + u. Further, suppose that the sample average CEO Salary is $525,000 and the sample average Annual ROA is 10% (assume that in your data Annual ROA is reported in percent form, not in decimal form). Finally, suppose your estimate of 0 is 230,000.

(a) What must your OLS estimate of 1be? Show your calculations.

(b) If Richard Smith, the CEO of XYZ Inc. has earned an annual salary of $800,000 this year and XYZ Incs ROA is 12% this year what is the value of u for Richard Smith?