Answer-first summary for fast verification
Answer: 23.18
## Explanation To calculate the predicted P/E ratio using the multiple regression model: **Regression Equation:** $$\text{P/E} = \text{Intercept} + (\text{Coefficient}_1 \times \text{Factor}_1) + (\text{Coefficient}_2 \times \text{Factor}_2)$$ **Given:** - Intercept = 2.8 - Coefficient for Factor 1 = 1.8 - Coefficient for Factor 2 = -0.4 - Factor 1 = 12.5 - Factor 2 = 5.3 **Calculation:** $$\text{Predicted P/E} = 2.8 + (1.8 \times 12.5) + (-0.4 \times 5.3)$$ $$= 2.8 + 22.5 + (-2.12)$$ $$= 2.8 + 22.5 - 2.12$$ $$= 25.3 - 2.12$$ $$= 23.18$$ Therefore, the predicted P/E ratio is **23.18**. **Note:** The calculation shows that 23.18 is the exact predicted value based on the given coefficients and factor values.
Author: LeetQuiz Editorial Team
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An analyst builds the following multiple regression model for a company's P/E ratio:
Coefficient
If Factor 1 and Factor 2 are assumed to be 12.5 and 5.3, respectively, the predicted P/E ratio is closest to:
A
23.18
B
25.30
C
27.42
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