Use the Financial database from “Excel Databases.xls” on Blackboard. Use Total Revenues, Total...

Question

Use the Financial database from “Excel Databases.xls” on Blackboard. Use Total Revenues, Total Assets, Return on Equity, Earnings Per Share, Average Yield, and Dividends Per Share to predict the average P/E ratio for a company. Use Excel to develop the multiple linear regression model. Assume a 5% level of significance.

Which independent variable is the strongest predictor of the average P/E ratio of a company?

A.
Total Revenues

B.
Average Yield

C.
Earnings Per Share

D.Return on Equity

E.
Total Assets

F.Dividends Per Share

Company	Type	Total Revenues	Total Assets	Return on Equity	Earnings per Share	Average Yield	Dividends per Share	Average P/E Ratio
AFLAC	6	7251	29454	17.1	2.08	0.9	0.22	11.5
Albertson's	4	14690	5219	21.4	2.08	1.6	0.63	19
Allstate	6	20106	80918	20.1	3.56	1	0.36	10.6
Amerada Hess	7	8340	7935	0.2	0.08	1.1	0.6	698.3
American General	6	3362	80620	7.1	2.19	3	1.4	21.2
American Stores	4	19139	8536	12.2	1.01	1.4	0.34	23.5
Amoco	7	36287	32489	16.7	2.76	3.1	1.4	16.1
Arco Chemical	2	3995	4116	6.2	1.14	6.1	2.8	40.4
Ashland	7	14319	7777	9.5	3.8	2.3	1.1	12.4
Atlantic Richfield	7	19272	25322	21.8	5.41	3.8	2.83	3.8
Bausch & Lomb	5	1916	2773	6	0.89	2.6	1.04	2.6
Baxter International	5	6138	8707	11.5	1.06	2.3	1.13	47.2
Bristol-Myers Squibb	5	16701	14977	44.4	3.14	2	1.52	24.1
Burlington Coat	1	1777	775	12.3	1.18	0.1	0.02	12.9
Central Maine Power	3	954	2299	2.4	0.16	7.8	0.9	79.6
Chevron	7	41950	35473	18.6	4.95	3	2.28	15.2
CIGNA	6	14935	108199	13.7	4.88	2	1.1	11.4
Cinergy	3	4353	8858	13.3	1.59	5.1	1.8	22.4
Dayton Hudson	1	27757	14191	18	1.7	1.2	0.33	16.2
Dillard's	1	6817	5592	9.2	2.31	0.4	0.16	15.7
Dominion Resources	3	7678	20193	7.9	2.15	6.8	2.58	17.7
Dow Chemical	2	20018	24040	23.6	7.7	3.6	3.24	11.6
DPL	3	1356	3585	13.9	1.2	5.3	0.91	14.3
E. I. DuPont DeNemours	2	46653	42942	21.3	2.08	2.1	1.23	27.9
Eastman Chemical	2	4678	5778	16.3	3.63	3	1.76	16
Edison International	3	9235	25101	12.3	1.73	4.2	1	13.6
Engelhard	2	3631	2586	6.1	0.33	1.9	0.38	61.8
Entergy	3	9562	27001	4.2	1.03	6.9	1.8	25.4
Equitable	6	9666	151438	12.3	2.86	0.5	0.2	13.4
Ethyl	7	1064	1067	53.6	0.71	5.6	0.5	12.6
Exxon	7	137242	96064	19.4	3.37	2.8	1.63	17.1
FPL Group	3	6369	12449	12.2	3.57	3.7	1.92	14.4
The GAP	1	6508	3338	33.7	1.3	0.7	0.2	22
Georgia Gulf	2	966	613	228	2.39	1.1	0.32	11.8
GIANT Food	4	4231	1522	7.9	1.18	2.4	0.78	26.9
A & P	4	10262	2995	6.9	1.66	1.2	0.35	17.8
Great Lakes Chemicals	2	1311	2270	5.5	1.19	1.3	0.62	40.5
Green Mountain Power Company	3	179	326	8.3	1.57	7.3	1.61	14
Hannaford Bros.	4	3226	1227	9.9	1.4	1.5	0.54	26.6
Hercules	2	1866	2411	47	3.18	2.2	1	14.5
Houston Industries	3	6873	18415	8	1.66	6.6	1.5	13.7
Jefferson-Pilot	6	2578	23131	14.5	3.47	2.3	1.04	13.3
Johnson & Johnson	5	22629	21453	26.7	2.41	1.5	0.85	24.1
Liberty	6	660	3185	11.1	3.34	1.8	0.77	12.7
The Limited	1	9189	4301	10.6	0.79	2.3	0.48	26.7
Lincoln National	6	4899	77175	0.4	0.21	3.1	1.96	300.2
Lubrizol	2	1674	1462	19	2.66	2.6	1.01	14.5
Lyondell Petrochemical	7	3010	1559	46.2	3.58	3.9	0.9	6.4
Mallinkrodt	5	1868	2988	14.8	2.47	1.7	0.66	16
May Department Stores	1	12685	9930	20.5	3.11	2.4	1.2	16.2
McKesson	5	20857	5608	11	1.59	1.2	0.5	26
Mercantile Stores	1	3144	2178	7.9	3.53	2.1	1.19	16.3
Merck	5	23637	25812	36.6	3.74	1.7	1.69	26.6
Millennium Chemicals	2	3048	4326	12.6	2.47	2.9	0.6	8.3
Mobil	7	65906	43559	16.8	4.01	3.1	2.12	17.2
Monsanto	2	7514	10774	7.2	0.48	1.1	0.5	90.7
Morton	2	2388	2805	12.3	1.48	1	0.36	25.2
Murphy Oil	7	2138	2238	12.3	2.94	2.6	1.35	18
Mylan Laboratories	5	555	848	13.5	0.82	0.9	0.16	22.4
NALCO Chemical	2	1434	1441	25	2.1	2.6	1	18.3
Nevada Power	3	799	2339	10.1	1.65	6.8	1.6	14.2
NIPSCO	3	2587	4937	14.1	1.53	4.1	0.9	14.4
Olin	2	2410	1946	17.4	3	2.8	1.2	14.5
Orion Capital	6	1591	3884	16	4.15	1.5	0.6	9.8
Owens & Minor	5	3117	713	9.4	0.6	1.4	0.18	21.7
Pacific Corporation	3	6278	13880	5.2	0.68	4.6	1.08	34.2
J. C. Penney	1	30546	23493	7.7	2.1	3.8	2.13	26.9
Pennzoil	7	2654	4406	15.8	3.76	1.6	1	17.1
Pfizer	5	12504	15336	27.9	1.7	1.1	0.68	35.4
Pharmacia & Upjohn	5	6710	10380	5.8	0.61	3.1	1.08	56.2
Phillips Petroleum	7	15424	13860	19.9	3.61	3	1.34	12.4
Poe & Brown	6	129	194	25.1	1.48	1.5	0.35	16.3
PPG	2	7379	6868	28.5	3.94	2.3	1.33	14.7
PP&L Resources	3	3049	9485	11.4	1.8	7.7	1.67	12
Progressive	6	4190	7560	18.7	5.31	0.3	0.24	17
Rohm & Haas	2	3999	3900	19.8	2.13	2.2	0.63	13.4
Ruddick	4	2300	885	12.5	1.02	1.8	0.32	17
Schering-Plough	5	6778	6507	51.2	1.95	1.5	0.74	24.6
Sears, Roebuck	1	41296	38700	20.3	2.99	1.8	0.92	17.4
Stryker	5	980	985	20.5	1.28	0.3	0.11	27.2
Sun	7	10531	4667	18	2.7	2.8	1	13
Sunamerica	6	2114	35637	14.7	1.8	0.9	0.3	19.5
Texaco	7	46667	29600	20.9	4.87	3.1	1.75	11.5
The TJX Companies	1	7389	2610	26.3	1.75	0.6	0.09	8.2
Torchmark	6	2283	10967	17.5	2.39	1.7	0.59	14.2
Tosco	7	13282	5975	10.9	1.37	0.8	0.24	23
Travelers	6	37609	386555	14.9	2.54	0.9	0.4	17
Ultramar Diamond Shamrock	7	10882	5595	9.5	1.94	3.5	1.1	16.1
Union Carbide	2	6502	6964	28.8	4.53	1.6	0.79	10.7
United States Surgical Corporation	5	1172	1726	7.5	1.21	0.5	0.16	29
UNOCAL	7	6064	7530	28.9	2.65	2	0.8	15.5
UNUM	6	4077	13200	15.2	2.59	1.3	0.56	17
USX-Marathon	7	15754	10565	12.6	1.58	2.4	0.76	19.8
Valero Energy	7	5756	2493	9.6	2.03	1.2	0.42	17.2
Warner-Lambert	5	8180	8031	30.7	1.04	1.4	0.51	35.7
WEIS Markets	4	1819	972	9.2	1.87	3	0.94	16.9
Wellman	2	1083	1319	4.8	0.97	1.8	0.35	20.5
Winn-Dixie Stores	4	13219	2921	15.3	1.36	2.7	0.98	27.2
WITCO	2	2187	2298	14	1.55	2.9	1.12	24.9
Zenith Nation Insurance	6	601	1252	7.8	1.57	3.7	1	17

Use the Financial database from “Excel Databases.xls” on Blackboard. Use Total Revenues, Total Assets, Return on Equity, Earnings Per Share, Average Yield, and Dividends Per Share to predict the...

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