Here are earnings per share for two companies by quarter from the first quarter

Question

Here are earnings per share for two companies by quarter from the first quarter of 2009 through the second quarter of 2012. Forecast earnings per share for the rest of 2012 and 2013. Use exponential smoothing to forecast the third period of 2012, and the time series decomposition method to forecast the last two quarters of 2012 and all four quarters of 2013. (It is much easier to solve this problem on a computer spreadsheet so you can see what is happening.) $0.16 0 26 0.23 0.32 0.24 0.33 0.34 0.45 0.31 0.46 0.45 0,47 0.27 0 47 $ 1.64 2.36 2009 16 121 1.62 204 1.19 029 029 2010 2011 -0.23 (loss) -0.93 (loss) 0.40 -1.61 (loss) 0 34 2012 For the exponential smoothing method, choose the first quarter of 2009 as the beginning torecast Make two forecasts one with a 020 and one with C 030 (Negative values should be indicated by a minus sign. Round your answers to 3 decimal places.) a. Forecast a;030 Forecast 0.30 orecast 0.20 0201 2009 I 2010 I IV 2011 1 IV

Explanation / Answer

Company A

company B

b-2 Based on MAD, Alpha = .30 perform better than alpha = 0.2

Month Actual Demand Exponential Forecasting = Previous period forecast + (Alpha * error) Error = Actual - Forecast Abs(Error) Cumulative Abs(errror) Month Actual Demand Exponential Forecasting = Previous period forecast + (Alpha * error) Error = Actual - Forecast Abs(Error) Cumulative Abs(errror) 1 1.64 1.640 0.000 0.000 0.000 1 1.64 1.640 0.000 0.000 0.000 2 2.36 1.640 0.720 0.720 0.720 2 2.36 1.640 0.720 0.720 0.720 3 1.16 1.784 -0.624 0.624 1.344 3 1.16 1.856 -0.696 0.696 1.416 4 1.21 1.659 -0.449 0.449 1.793 4 1.21 1.647 -0.437 0.437 1.853 5 1.62 1.569 0.051 0.051 1.844 5 1.62 1.516 0.104 0.104 1.957 6 2.04 1.579 0.461 0.461 2.304 6 2.04 1.547 0.493 0.493 2.450 7 1.19 1.672 -0.482 0.482 2.786 7 1.19 1.695 -0.505 0.505 2.955 8 0.29 1.575 -1.285 1.285 4.071 8 0.29 1.544 -1.254 1.254 4.209 9 0.29 1.318 -1.028 1.028 5.099 9 0.29 1.167 -0.877 0.877 5.086 10 -0.23 1.113 -1.343 1.343 6.442 10 -0.23 0.904 -1.134 1.134 6.220 11 -0.93 0.844 -1.774 1.774 8.216 11 -0.93 0.564 -1.494 1.494 7.714 12 0.4 0.489 -0.089 0.089 8.305 12 0.4 0.116 0.284 0.284 7.998 13 -1.61 0.471 -2.081 2.081 10.387 13 -1.61 0.201 -1.811 1.811 9.809 14 0.34 0.055 0.285 0.285 10.672 14 0.34 -0.342 0.682 0.682 10.492 15 0.112 -0.138 MAD = 10.672/14 = 0.7623 MAD = 10.492/14 = 0.7494

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