EXPLAIN AND SHOW YOUR WORK

2. Forecasting (Total 25 points) Columbus Municipal Government has asked you to forecast the sales tax revenue it will collect in Year 6. Year 7 and Year 8. Data on revenue in recent years is presented below. Year Year 1 Year 2 Year 3 Year 4 Year 5 *In thousands Q1 695 896 1,037 1,067 1,147 Q2 788 941 929 1,081 1.161 Q3 809 1,018 1,353 1,574 1,683 Q4 1,302 1,677 2,090 2.143 2.372 TOTAL $3,594 $4,532 $5,409 $5,865 $6,362 The annual data are graphed below: Sales Tax Revenues in thousands 57,000 $6,362 $6,000 $5,865 35,409 $5,000 $4,532 $4,000 $3,594 $3,000 $2,000 $1,000 $0 Year 1 Year 2 Year 3 Year 4 Year 5 a. Estimate annual sales tax revenue for Year 6. Year 7 and Year 8 using a moving average "3-day" (MA3) model. Please clearly show the process you use to come up with your estimates. (5 points) b. Estimate annual sales tax revenue for Year 6. Year 7, and Year 8 using a moving average "4-day" (MA4) model. Please clearly show the process you use to come up with your estimates. (5 points) c. Forecast the expected annual sales tax revenue for Year 6. Year 7 and Year 8 using the trend regression model. (5 points) d. Do you recommend that the trend regression model be employed in this case? Why or why not? (5 points)