Using cross-sectional data for a sample of 40 Singapore companies for 2019, the following model was...

  

 

 

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Using cross-sectional data for a sample of 40 Singapore companies for 2019, the following model was estimated by ordinary least squares regression: Market Cap of Coy₁ = X₁ + X ₂ Growth; + X3 EBITDA_EV ₁ +X 4 ROC₁ where Market Cap of Coy is the value of the company defined as number of shares * share price Growth is the estimated growth rate of revenues for the next two years EBITDA_EV is the ratio of EBITDA (Earnings Before Interest, Depreciation and Amortisation) to Enterprise Value ROC is before-tax return on capital The regression results are given below: Coefficient Std. estimate Error 0.24 0.186 1.335 0.118 Constant Growth EBITDA_EV ROC 0.436 0.04 0.448 -0.3 t-stat 1.817 0.215 0.336 -2.542 p-value 0.0769 0.8309 0.7387 0.0151 The R-square is 0.60 and Adjusted R-square of the regression is 0.58. Using these results, answer the questions below. The F-stats is 0.0655. a) Comment on the accuracy of the regression model. Suggest improvements that could be made to increase the accuracy of the model. b) Calculate the expected market cap of a firm with the following characteristics: Growth = 0.10, EBITDA_EV =0.26 and ROC=0.1 c) A college professor is interested to find out if the students taking quantitative subjects such as finance will score as well in non- quantitative subjects such as management theory. He conducted a survey on a sample of students and which resulted in the following scores of the students taking both Corporate Finance and Management Theory. Calculate Spearman's Rank Correlation and comment on the results. You can use Excel to perform the calculations. Corporate Finance 81 55 | 29 42 77 64 Management Theory 21 47 87 53 94 38 Using cross-sectional data for a sample of 40 Singapore companies for 2019, the following model was estimated by ordinary least squares regression: Market Cap of Coy₁ = X₁ + X ₂ Growth; + X3 EBITDA_EV ₁ +X 4 ROC₁ where Market Cap of Coy is the value of the company defined as number of shares * share price Growth is the estimated growth rate of revenues for the next two years EBITDA_EV is the ratio of EBITDA (Earnings Before Interest, Depreciation and Amortisation) to Enterprise Value ROC is before-tax return on capital The regression results are given below: Coefficient Std. estimate Error 0.24 0.186 1.335 0.118 Constant Growth EBITDA_EV ROC 0.436 0.04 0.448 -0.3 t-stat 1.817 0.215 0.336 -2.542 p-value 0.0769 0.8309 0.7387 0.0151 The R-square is 0.60 and Adjusted R-square of the regression is 0.58. Using these results, answer the questions below. The F-stats is 0.0655. a) Comment on the accuracy of the regression model. Suggest improvements that could be made to increase the accuracy of the model. b) Calculate the expected market cap of a firm with the following characteristics: Growth = 0.10, EBITDA_EV =0.26 and ROC=0.1 c) A college professor is interested to find out if the students taking quantitative subjects such as finance will score as well in non- quantitative subjects such as management theory. He conducted a survey on a sample of students and which resulted in the following scores of the students taking both Corporate Finance and Management Theory. Calculate Spearman's Rank Correlation and comment on the results. You can use Excel to perform the calculations. Corporate Finance 81 55 | 29 42 77 64 Management Theory 21 47 87 53 94 38

Answer rating: 100% (QA)

Answer a The accuracy of the regression model can be assessed based on several factors 1 Rsquare and Adjusted Rsquare The Rsquare value measures the proportion of the variance in the dependent variabl... View the full answer