Tigers Ltd. sells tiger related paraphernalia and has been in operation since 2011. The company...
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Tigers Ltd. sells tiger related paraphernalia and has been in operation since 2011. The company is trying to estimate its future sales. Its past sales were as follows:
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
| 5 | 7 | 9 | 10 | 11 | 15 | 16 | 23 | 22 | 21 |
The company hired a business consultant who performed a regression analysis to estimate its future sales which yielded the following equation:
Y = 2.1x + 2.5 (R^2 = 0.93)
The consultant indicated that replacing 11 into the equation should yield the next years sales estimate, 12 for the year thereafter and so on. The estimate for 2021 is R25.6 million.
One of the larger store managers indicated that they feel that it is overoptimistic as his store sales has been flat over the past two years.
Required: Briefly advise the management of Tigers Ltd. on the objective forecasting technique used and argue who is correct in this case (support your argument with facts from the question and theory).
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