The regression equation Netincome 2,454 0.0313 Revenue was estimated from a samp
ID: 3057521 • Letter: T
Question
The regression equation Netincome 2,454 0.0313 Revenue was estimated from a sample of 100 leading world companies (variables are in millions of dollars). (a-1) Calculate the residual for the x, y pair (S49,963, $4,245). (A negative value should be indicated by a minus sign. Round your answer to 4 decimal places.) Residual (a-2) Did the regression equation underestimate or overestimate the net income? O The regression equation underestimated the net income. O The regression equation overestimated the net income. (b-1) Calculate the residual for the x, y pair ($63,971, 54,862).(A negative value should be indicated by a minus sign. Round your answer to 4 decimal places.) Residual (b-2) Did the regression equation underestimate or overestimate the net income? O The regression equation underestimated the net income. O The regression equation overestimated the net income.Explanation / Answer
a - 1) For x = 49963,
Estimated y = 2454 + 0.0313*49963 = 4017.8419
Hence,
Residual = 4245 - 4017.8419 = 227.1581
a - 2) Since residual is positive, the regression equation underestimated the net income.
b - 1) For x = 63971,
Estimated y = 2454 + 0.0313*63971= 4456.2923
Hence,
Residual = 4862 - 4456.2923 = 405.7077
a - 2) Since residual is positive, the regression equation underestimated the net income.