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Answer: 13.18%
## Explanation The regression equation is: NPM = Intercept + (Slope coefficient × RDR) Given: - Intercept = 17.38% - Slope coefficient = -0.6000 - Forecasted RDR = 7% Calculation: NPM = 17.38% + (-0.6000 × 7%) NPM = 17.38% + (-4.20%) NPM = 17.38% - 4.20% NPM = 13.18% Therefore, the predicted value of NPM for a forecasted RDR of 7% is 13.18%, which corresponds to option B. **Key points:** 1. The regression model predicts NPM based on RDR 2. The negative slope coefficient (-0.6000) indicates an inverse relationship between RDR and NPM 3. When RDR increases, NPM decreases, which makes economic sense as higher R&D spending reduces profit margins in the short term
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An analyst regresses net profit margin (NPM) on research and development expenditure scaled by revenues (RDR) and gathers the following information:
| Estimate | Value |
|---|---|
| Intercept | 17.38% |
| Slope coefficient | -0.6000 |
The predicted value of NPM for a forecasted RDR of 7% is closest to:
A
4.20%
B
13.18%
C
21.58%
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