Steve Douglas has been hired as a management trainee by a large brokerage firm. As his first project, he is asked to study the gross profit of firms in the chemical industry. What factors affect profitability in that industry? Steve selects a random sample of 16 firms and obtains data on the number of employees, number of consecutive common stock dividends paid, the total value of inventory at the start of the current year, and the gross profit for each firm. His findings are as follows:

Company	Gross Profit ($000), y	Number of Employees, x1	Consecutive Dividends, x2	Beginning Inventory, x3
1	2800	140	12	1800
2	1300	85	21	320
3	1230	130	42	920
4	1600	115	80	96
5	4500	390	120	3600
6	5700	670	64	8450
7	3250	205	43	598
8	640	90	14	870
9	3470	480	88	5550
10	6700	810	98	9875
11	3700	120	440	6500
12	6440	590	110	9130
13	1280	440	38	1200
14	4160	280	24	1890
15	3870	650	60	1200
16	980	250	44	1300

A. Determine the regression equation. The Master Chemical Company employs 220 people, has paid 64 consecutive common stock dividends, and has an inventory valued at $1 500 000 at the start of the year. What is the estimate of the gross profit?

B. Conduct a global test of hypothesis to determine whether any of the net regression coefficients differ from zero. Test at a significance level of 0.05.

C. Conduct a test of hypothesis for the individual regression coefficients. Would you consider deleting any of the independent variables? Test at a significance level of 0.05.

D. If your conclusion in part (c) was to delete one or more independent variables, run the regression equation again, deleting those variables.

Answer rating: 100% (QA)

SUMMARY OUTPUT Regression Statistics Multiple R 0884019604 R Square 0781490661 Adjusted R Square 0726863326 Standard Error 1025479651 Observations 16 ... View the full answer