Objective: Use historical data to predict future demand for a product for 10 years.

Problem: Ellie D. has taken over production of Wozac from a rival drug company. Wozac's annual demand from April 2013 to March 2022 are provided below and in excel spreadsheet.

year Demand

2013 500,000

2014 544,000

2015 593,000

2016 672,000

2017. 723,000

2018 757,000

2019 848,000

2020 948,000

2021 964,000

2022 1011000

Ellie must build a factory to produce Wozac starting the beginning of April 2023. Once the plant is built, the plant's capacity cannot be changed for the next 10 years. This, Ellie wants to predict the demand for the next 10 years to help decide on the factory capacity.

Use the statistical model below to forecast demand for 10 years.

Demand Year t = B0 + B1 * Demand year (t-1) + error term

For this you need to use the Regression in the Excel. The output from the Excel to determine the model coefficients B0 and B1 as well as the error term which is Normal (0, Standard Error)

Based on the demand prediction on 2032, what capacity would you recommend for the factory?