Regression analysis: In a hypothetical example, a professor is considering the purchase of a 1964 Beechcraft Debonair with a tach time (TT) of 6100 hours and 1000 hrs since its last major overhaul (SMOH). He takes a look at the most recent issue of Trade-A-Plane and finds 12 Debonair planes listed with year and tach time in hours and runs a regression of price on year and tach time and hours SMOH.

a. What is the estimated multiple regression equation?

b. What is the R2 for this regression? Interpret it.

c. Are the independent variables significant? How do you know?

d. What would be a reasonable price to pay for the plane he is looking at?

e. What caveats would you warn him about?

Summary of Fit RSquare RSquare Adj Root Mean Square Error Mean of Response Observations 0.707752 0.598159 9969.592 60883.33 12 Analysis of Variance Source Model Error C. Total DF Sum of Squares 3 1925634497 8 795142169 11 2720776667 Mean Square 641878166 99392771 F Ratio 6.4580 Prob > F 0.0157* > Parameter Estimates Term Intercept Year Estimate -6579747 3396.0478 -2.336594 - 14.04049 Std Error 2125920 1083.622 t Ratio -3.10 3.13 Prob>It! 0.0148 0.0139 TT -0.87 0.4091 2.682751 6.94974 SMOH -2.02 0.0780