Southdown, Inc., the nation's third largest cement producer, is pushing ahead with a waste fuel burning program.
Question:
a. Use exponential smoothing with a smoothing constant of .4 and an initial value of 77.4 to forecast the quarterly revenues for the first quarter of 2000.
b. Now use a smoothing constant of .6 and an initial value of 77.4 to forecast the quarterly revenues for the first quarter of 2000.
c. Which smoothing constant provides the better forecast?
d. Refer to part c. Examine the residual autocorrelations. Are you happy with simple exponential smoothing for this example? Explain.
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