finreview-F09y - ISOM 111 BUSINESS STATISTICS REVIEW FOR...

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1 ISOM 111 B USINESS S TATISTICS R EVIEW FOR F INAL E XAM created by Andrew Yam Question 6 in Final 2003 A financial analyst is doing a study of companies going public for the first time. He is curious to see whether there is significant relationship between the size of the company (in millions of dollars) and the price per share (in dollars). He collected data on 14 companies and did a regression analysis. Some results are given below: Regression Analysis The regression equation is Price = 7.53 + 0.0285 Size Predictor Coef SE Coef T P Constant 7.53 1.24 6.06 Size 0.0285 2.49 S = 4.03 R-Sq = 34.1% Analysis of Variance Source DF SS MS Regression 1 Residual Error 12 Total 13 296 a) Please interpret the regression equation specifically in the context of this problem. b) According to a certain theory, the financial analyst claims that when the size of the company increases by 1 million on the average the price per share should increase by more than 2 cents. Can you help him testing this theory and draw conclusion?
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