Session:14 Regression Analysis in Finance
Problems
Principles of Finance | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-finance
1 . A Fortune 500 company is tracking revenues versus cash flow for recent years, and the data is shown in the table below. Consider cash flow to be the dependent variable. Create a scatter plot of the data set, comment on the correlation between these two variables, and comment on the correlation for this data (all dollar amounts are in thousands).
| Revenues ($000s) | Cash Flow ($000s) |
| 237 | 82 |
| 241 | 86 |
| 229 | 77 |
| 284 | 94 |
| 307 | 93 |
2 . A Fortune 500 company is tracking revenues versus cash flow for recent years, and the data is shown in the table below. Consider cash flow to be the dependent variable. Calculate the correlation coefficient for this data (all dollar amounts are in thousands).
| Revenues ($000s) | Cash Flow ($000s) |
| 237 | 82 |
| 241 | 86 |
| 229 | 77 |
| 284 | 94 |
| 307 | 93 |
4 . A Fortune 500 company is tracking revenues versus cash flow for recent years, and the data is shown in the table below. Consider cash flow to be the dependent variable. Determine the best-fit linear regression equation for this data set (all dollar amounts are in thousands).
| Revenues ($000s) | Cash Flow ($000s) |
| 237 | 82 |
| 241 | 86 |
| 229 | 77 |
| 284 | 94 |
| 307 | 93 |
5 . A Fortune 500 company is tracking revenues versus cash flow for recent years, and the data is shown in the table below. Consider cash flow to be the dependent variable. Assume the correlation is significant. Predict the cash flow for company revenues of $250,000 (all dollar amounts are in thousands).
| Revenues ($000s) | Cash Flow ($000s) |
| 237 | 82 |
| 241 | 86 |
| 229 | 77 |
| 284 | 94 |
| 307 | 93 |
6 . A Fortune 500 company is tracking revenues versus cash flow for recent years, and the data is shown in the table below. Consider cash flow to be the dependent variable. Assume the correlation is significant. Predict the cash flow for company revenues of $750,000 (all dollar amounts are in thousands).
| Revenues ($000s) | Cash Flow ($000s) |
| 237 | 82 |
| 241 | 86 |
| 229 | 77 |
| 284 | 94 |
| 307 | 93 |
7 . A Fortune 500 company is tracking revenues versus cash flow for recent years, and the data is shown in the table below. Consider cash flow to be the dependent variable. Calculate the residual for the revenue value of $284,000 (all dollar amounts are in thousands):
| Revenues ($000s) | Cash Flow ($000s) |
| 237 | 82 |
| 241 | 86 |
| 229 | 77 |
| 284 | 94 |
| 307 | 93 |