Question

Here are earnings per share for two companies by quarter from the first quarter of three years ago through the second quarter of this year. Forecast earnings per share for the rest of this year and next year. Use exponential smoothing to forecast the third period of this year, and the time series decomposition method to forecast the last two quarters of this year and all four quarters of next year.

		EARNINGS PER SHARE
	QUARTER	COMPANY A		COMPANY B
3 years ago	I	$ 1.66		$ 0.16
	II	2.38		0.21
	III	1.18		0.25
	IV	1.20		0.34
2 years ago	I	1.64		0.26
	II	2.06		0.35
	III	1.22		0.35
	IV	0.32		0.45
last year	I	0.32		0.33
	II	–0.25	(loss)	0.47
	III	–0.91	(loss)	0.48
	IV	0.21		0.49
this year	I	–1.63	(loss)	0.26
	II	0.35		0.49

a. For the exponential smoothing method, choose the first quarter of 3 years ago as the beginning forecast. Make two forecasts: one with α = 0.10 and one with α = 0.30. (Negative values should be indicated by a minus sign. Round your answers to 3 decimal places.)

		Company A			Company B
	Quarter	Forecast α = 0.10	Forecast α = 0.30	Forecast α = 0.10	Forecast α = 0.30
3 years ago	I
	II
	III
	IV
2 years ago	I
	II
	III
	IV
last year	I
	II
	III
	IV
this year	I
	II
	III

b-1. Calculate the MAD for each forecast using data starting with second quarter of 3 years ago through second quarter of this year. (Round your answers to 3 decimal places.)

	MAD
	Company A	Company B
α = 0.10
α = 0.30

Answer 1

Please find attached solution for the problem in the picture attached.

A basic calculation is performed so as an example to explain the formula.