Chapter 16, Problem 1PS

If you are using exponential smoothing for forecasting an annual time series of revenues, what is your forecast for next year if the smoothed value for this year is $\text{\$}32.4$ million?

To determine

State the forecasted value for the next year.

Answer to Problem 1PS

The forecasted value for the next year is $32.4$ million dollar.

Explanation of Solution

Exponentially smoothing is a weighted average cost of all the previous time periods. Therefore, the smoothed value in the current time period works as the forecast of the value in the following year.

Here $E_i=32.4$ . Therefore, the forecasted value $\left({\widehat{Y}}_{i+1}\right)$ for the next year is given below:

$\begin{array}{c}{\widehat{Y}}_{i+1}=E_i\\ =32.4\end{array}$