Question

L. (6 pts) Answer the questions of this problem, using the following estimated equation: In(salary)-4.503 + 0.163 ln(sales) + 0.109 In(mktval) + 0.0 12ceoten Std. errors (0.257) (0.039) (0.049) (0.005) n 177 R-squared-0.3182 Where the variables are described as follows: salary CEO compensation, in $1000 sales firm sales, in Smillions mkival the market value of the firm, in Smillions ceoten - the number of years as CEO with the company. a. what is the impact on CEO salary, of a 50% increase in the firm's market value? (1pt). b. ' What is wrong with the statement: "A 10% increase in sales revenue is associated with about a 16.3% increase in salary..? (1pt). Interpret the coefficient of the variable ceoten. (Ipt) with a 5% significance level, test the hypothesis that a longer tenure has a positive effect on the CEO salary. (1pt) A company in our sample currently has a market value of $23,200 millions, a total revenue from sales evaluated at $6,200 millions, and a CEO who has been with the firm for 2 years already. Calculate the estimated In(salary) of this company's CEO. (Ipt). c. d, e. f. With a 5% significance, are the variables sales, market value, and CEO tenure, jointly significant predictors of CEO salary? (1pt)

Answer 1

a.
Everything else held constant, a 50% increase in market values results in 0.109*50% = 5.45% increase in CEO salary

b. This statement doesn't include the term ceteris paribus or everything else held constant.

c. Everything else held constant, if the ceoten increases by 1 year, then predicted salary changes by 1.20%.

d.
Ho: B4 = 0
Ha: B4 > 0

The test statistic is:
t = (0.012 - 0)/0.005
t = 2.40

The t-critical at 173 degrees of freedoms is 1.65. Since calculated t-test statistic exceeds 1.65, hence we can reject the Ho.

PS: According to Chegg rules in the event multiple sub-parts, only first 4 are solved