25. This question refers to Problem 23.

a. Consider a naive forecasting method where the first-quarter income is used to forecast first-quarter income for the following year, second-quarter income is used to forecast second-quarter income, and so forth. For example, a forecast of first-quarter income for 1998 is provided by the first-quarter income for 1997, 50.87 (see Table P-23). Use this naive method to calculate forecasts of quarterly income for the years 1998–1999.

TABLE P-23 Quarterly Income for Southwest Airlines ($MM) Year 1st 2nd 3rd 4th 1988 0.17 15.13 26.59 16.07 1989 19.64 19.24 24.57 8.11 1990 5.09 23.53 23.04 -4.58 1991 -8.21 10.57 15.72 8.84 1992 13.48 23.48 26.89 27.17 1993 24.93 42.15 48.83 38.37 1994 41.85 58.52 58.62 20.34 1995 11.83 59.72 67.72 43.36 1996 33.00 85.32 60.86 28.16 1997 50.87 93.83 92.51 80.55 1998 70.01 133.39 129.64 100.38 1999 95.85 157.76 126.98 93.80

b. Using the forecasts in part

a, calculate the MAD, RMSE, and MAPE.

c. Given the results in part b and the nature of the patterns in the income series, do you think this naive forecasting method is viable? Can you think of another naive method that might be better?