Researchers interested in determining the relationship between a firm’s annual sales and its expenditures on research and development (x1), television advertising

(x₂), and all other advertising (x₃) run a regression analysis of 23 firms in the same industry. The results are

The quantities in parentheses are the standard errors of the net regression coefficients. The standard error of estimate S_y.123 is 124. The standard deviation of the dependent variable S_y is 325.

(a) Interpret the net regression coefficient b₁.

(b) Test, at the 1 % level of significance, whether each of the net regression coefficients is significantly different from zero.

(c) What is the expected effect when highly correlated independent variables are included in a multiple regression equation?

(d) Calculate the coefficient of multiple correlation and the coefficient of multiple determination.

(e) Estimate the average annual sales for a firm that has research and development expenditures of $6 million, television advertising expenditures of $10 million, and all other advertising expenditures of $7 million.

Transcribed Image Text:

= -2.3 +5.8x1 + 4.2x2 +7.4x3 (1.20) (1.31) (1.56)