Question

There is considerable variation in the amount CEOs of different companies are paid, and some of it might be explained by differences in company characteristics. Consider the information in Table 12.5.7 on CEO salaries, sales, and return on equity (ROE) for selected northwest companies.
a. What percentage of the variability in salary is explained by company sales and ROE?
b. What is the estimated impact on salary, in additional dollars, of an increase in sales of 100 million dollars, holding ROE constant? Is this statistically significant?
c. What is the estimated impact on salary, in additional dollars, of an increase in ROE of one percentage point, holding sales constant? Is this statistically significant?
d. Identify CEO and company corresponding to the smallest salary, the smallest predicted salary, and the smallest residual of salary (using sales and ROE as explanatory variables). Write a few sentences interpreting these results.


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  • CreatedNovember 11, 2015
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