The Table in my homework question below is completely wrong. I am not sure where I...

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The Table in my homework question below is completely wrong. Iam not sure where I went wrong in my calculations but coud yourework this question and answer the parts below??

Here are earnings per share for two companies by quarter fromthe first quarter of 2009 through the second quarter of 2012.Forecast earnings per share for the rest of 2012 and 2013. Useexponential smoothing to forecast the third period of 2012, and thetime series decomposition method to forecast the last two quartersof 2012 and all four quarters of 2013. (It is much easier to solvethis problem on a computer spreadsheet so you can see what ishappening.)


EARNINGS PER SHARE

QUARTERCOMPANY ACOMPANY B
2009I$ 1.68$ 0.21        
II2.360.23        
III1.210.21        
IV1.300.35        
2010I1.660.20        
II2.080.36        
III1.310.37        
IV0.340.48        
2011I0.340.35        
II–0.19(loss)0.49        
III–0.87(loss)0.51        
IV0.240.52        
2012I–1.65(loss)0.31        
II0.370.52        


a.

For the exponential smoothing method, choose the first quarterof 2009 as the beginning forecast. Make two forecasts: one withα = 0.20 and one with α = 0.30. (Negativevalues should be indicated by a minus sign. Round your answers to 3decimal places.)

For the exponential smoothing method, choose the first quarterof 2009 as the beginning forecast. Make two forecasts: one withα = 0.20 and one with α = 0.30. (Negativevalues should be indicated by a minus sign. Round your answers to 3decimal places.)

Company A

Company B

          QuarterForecast
α = 0.20
Forecast
α = 0.30
Forecast
α = 0.20
Forecast
α = 0.30
2009   I            
           II            
          III            
           IV            
2010    I            
            II            
           III            
            IV            
2011    I            
            II            
            III            
            IV            
2012     I            
             II            
            III            


b-1.

Calculate the MAD for each forecast using data starting withsecond quarter of 2009 through second quarter of 2012.(Round your answers to 3 decimal places.)


MAD

    Company A    Company B
  α =0.20    
  α =0.30    


b-2.

Using the MAD method of testing the forecasting model'sperformance, plus actual data from 2009 through the second quarterof 2012, how well did the model perform?


  Based upon MAD,(Click to select)0.30.2 performs better than an α of (Click toselect)0.20.3.

Answer & Explanation Solved by verified expert
3.9 Ratings (518 Votes)

for exponential smoothing: forecast =alpha*actual for last month+(1-alpha)*forecast for last month

a)

company A company B
          Quarter Forecast Forecast Forecast Forecast
α = 0.20 α = 0.30 α = 0.20 α = 0.30
2009    I                
           II 1.680 1.680 0.21 0.21
           III 1.816 1.884 0.214 0.216
           IV 1.695 1.682 0.213 0.214
2010     I 1.616 1.567 0.241 0.255
            II 1.625 1.595 0.232 0.238
           III 1.716 1.741 0.258 0.275
            IV 1.635 1.611 0.280 0.303
2011     I 1.376 1.230 0.320 0.356
            II 1.169 0.963 0.326 0.354
            III 0.897 0.617 0.359 0.395
            IV 0.543 0.171 0.389 0.430
2012      I 0.483 0.192 0.415 0.457
             II 0.056 -0.361 0.394 0.413
            III 0.119 -0.142 0.419 0.445

b-1)

MAD
Company A Company B
alpha=0.2 0.830 0.104
alpha=0.3 0.784 0.093

b-2)

Based upon MAD )0.3 performs better than an α of 0.2


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