The regression equation Netincome 2,454 0.0313 Revenue was estimated from a samp

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.

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