The regression equation Netlncome = 2,223 + 0.0301 Revenue was estimated from a

Question

The regression equation Netlncome = 2,223 + 0.0301 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 ($49,404, $3,461). (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 overestimated the net income. O The regression equation underestimated the net income. (b-1) Calculate the residual for the x, y pair ($60,282, $3,146).(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 overestimated the net income. O The regression equation underestimated the net income.

Explanation / Answer

a1. the prediction using the values provided is NetIncome=2223+0.0301*49404=3710.06

residual is y-y' = 3461-3710.06 =-249.06

a2. the residual equation overestimated it

b1. the prediction using the values provided is NetIncome=2223+0.0301*60282=4037.49

residual is  y-y' = 3416-4037.49=-621.49

b2. the residual equation overestimated it

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