Southdown, Inc., the nation's third largest cement producer, is pushing ahead with a waste fuel burning program. The cost for Southdown will total about $37 million. For this reason, it is extremely important for the company to have an accurate forecast of revenues for the first quarter of 2000. The data are presented in Table P-13.

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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