Corporate reputation and profitability. Is a company’s reputation (a subjective assessment) related to objective measures of corporate performance such as its profitability? One study of this relationship examined the records of 154 Fortune 500 firms.18 Corporate reputation was measured on a scale of 1 to 10 by a Fortune magazine survey. Profitability was defined as the rate of return on invested capital. Figure 10.19 contains SAS output for the regression of profitability (PROFIT) on reputation score (REPUTAT). The format is very similar to the Excel and Minitab output we have seen, with minor differences in labels. Exercises 10.65 through 10.72 concern this study. You can take it as given that examination of the data shows no serious violations of the conditions required for regression inference.

Question 10.68

10.68 Predicting profitability.

A company not covered by the Fortune survey has reputation score . Will a 95% prediction interval for this company’s profitability be wider or narrower than the confidence interval found in the previous exercise? Explain why we should expect this. Then give the 95% prediction interval.