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