Exercise 2: Variable Selection in Simple Regression Objective: To guide students through the process of selecting the most appropriate independent variable(s) for a regression model. Scenario: You are tasked with determining the relationship between ROA (%) (dependent variable) and Sales (in millions) independent variable) using a simple linear regression. Before starting the regression, you must decide which variable to use based on available information. Year Sales (in millions) ROA (%) 2015 1000 12 2016 1200 14 2017 1100 13 2018 1400 15 2019 1500 16 Instructions: 1. Perform a simple linear regression using Sales as the independent variable and ROA as the dependent variable. Before conducting the regression, explain why you think Sales is a good predictor of ROA. 3. Run the regression and report the coefficient of Sales and its significance. 4. Reflect on whether adding another variable (such as Gross Profit) could improve the model, and explain why