To Encourage Performance, Loyalty, and Continuing Education, the Human Resources

Multiple Choice

To encourage performance, loyalty, and continuing education, the human resources department at a large company wants to develop a regression-based compensation model for mid-level managers based on three variables: business unit-profitability in $1,000s (Profit) , years with company (Years) , and a dummy variable (Grad) which takes on 1 when the individual holds a graduate degree in a relevant field and 0 otherwise. Data have been collected for 36 managers. The sample regression equation is = - 13,264.3 + 14.13Profit + 1,868.53Years + 45,121.94Grad - 0.1539Profit × Grad - 198.34Years × Grad. Which of the following is the difference in the predicted compensations for two managers, one having graduate degree, the other one not, both having 10 years with the company, and having the same business-unit profit of $3,000,000?

A) $34,456.51
B) $38,980.72
C) $41,235.52
D) $47,566.51