RISK: EXPONENTIAL SMOOTHING FORECASTING AND VALUE OF INFORMATION
Assignment Overview
Scenario: You are still a consultant for the Excellent Consulting Group. You have completed the first assignment, developing and testing a forecasting method based on linear regression (Case 3). However, your consulting manager at ECG wants to go the next step and investigate another forecasting method. It is important to do a thorough job for the client, and you have the expertise to analyze different forecasting methods. You have decided to look at the sales data for client’s lottery app as a single data set and use a time series analysis, namely SES, single exponential smoothing.

Case Assignment
Using Excel, use the forecasted sales from Case 3 to compute the MAPE, by doing the following:

Calculate the MAPE for the first 12 months (assume the forecast for Month 1 – or January – is equal to January’s actual sales). Use 0.15 and 0.90 alphas.
Using the forecasted sales for Feb – April (taken from the Case 3 Linear Regression exercise), compute the MAPE by comparing actual sales for each month, or Y(t) to forecasted sales, or F(t). Compare this 3-month MAPE to the two MAPE values you calculated in your SES analysis above. Use the following table:
Month
Sales, Y(t)
Sales F(t)
Y(t) – F(t)
PE
APE
February
?
?
?
?
?
March
?
?
?
?
?
April
?
?
?
?
?

?
?
?

ME
MPE
MAPE

Then write a report to your boss that briefly describes the results that you obtained. Using MAPE values, make a recommendation on which method appears to be more accurate — SES or Linear Regression.

Data: Use the data that you previously have generated from your analyses in Case 3.
Assignment Expectations
Analysis

Accurate and complete SES analysis in Excel.
Written Report

Length requirements = 4–5 pages minimum (not including Cover and Reference pages)
Provide a brief introduction/ background of the problem.
Complete and accurate Excel analysis.
Written analysis that supports Excel analysis, and provides thorough discussion of assumptions, rationale, and logic used.
Complete, meaningful, and accurate recommendation(s).

 
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