# Question: This data file contains a variety of accounting and financial

This data file contains a variety of accounting and financial values that describe 324 companies operating in the information sector in 2010. The largest of these provide telephone services. One column gives the expenses on research and development (R&D), and another gives the total as-sets of the companies. Both columns are reported in millions of dollars. These data need to be expressed on a log scale; otherwise, outlying companies dominate the analysis. Use the natural logs of both variables rather than the original variables in the data table. (Note that the variables are recorded in mil-lions, so 1,000 = 1 billion.)

(a) What difference in R&D spending (as a percentage) is associated with a 1% increase in the assets of a firm? Give your answer as a range, rounded to meaningful precision.

(b) Revise your model to use base 10 logs of assets and R&D expenses. Does using a different base for both log transformations affect your answer to part (a)?

(c) Find a 95% prediction interval for the R&D expenses of a firm with $1 billion in assets. Be sure to express your range on a dollar scale. Do you expect this interval to have 95% coverage?

(a) What difference in R&D spending (as a percentage) is associated with a 1% increase in the assets of a firm? Give your answer as a range, rounded to meaningful precision.

(b) Revise your model to use base 10 logs of assets and R&D expenses. Does using a different base for both log transformations affect your answer to part (a)?

(c) Find a 95% prediction interval for the R&D expenses of a firm with $1 billion in assets. Be sure to express your range on a dollar scale. Do you expect this interval to have 95% coverage?

**View Solution:**## Answer to relevant Questions

The cases that make up this dataset are types of cars. The data include the engine size or displacement (in liters) and horsepower (HP) of 318 vehicles sold in the United States in 2011. Use the SRM of the horsepower on the ...The Capital Asset Pricing Model (CAPM) describes the relationship between returns on a speculative asset (typically returns on stock) and returns on the whole stock market. The underlying theory describes the risk of owning ...As part of locating a new factory, a company investigated the education and income of the local population. To keep costs low, the size of the survey of prospective employees was proportional to the size of the community. ...Estimate the value of the autocorrelation Corr (εt, εt –1) if the Durbin-Watson statistic (a) D = 0.8? (b) D = 1.5? (c) D = 3? This table contains accounting and financial data that describe 324 companies operating in the information sector in 2010. The largest of these provide telephone services. One column gives the expenses on research and ...Post your question