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Kelly Cronin is one of the statistical experts at CMSSP. He is presently using i...
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Kelly Cronin is one of the statistical experts at CMSSP. He is presently using internally-developed software to explain the relationship between a company’s EPS growth and profitable opportunities as measured by the spread between the equity return on new projects and the firm’s cost of equity. After regressing a sample company’s historical EPS on its return spread for the past ten years, Cronin presented the results to his superior, Brendan Tracy. The following table displays the results of the regression:
Using the information provided in Exhibit 1, the confidence interval for the slope coefficient at the 5% significance level is closest to:Exhibit 1: Explaining EPS Growth by Changesin the Return Spread Coefficients Standard error Intercept 1.2070.5522 Return spread 22.9011.992Regression StatisticsStandard error of estimate 1.120 Observations 62 Mean return spread 0.0943 Variance of mean return spread 0.0077240%
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