Corporate Finance
Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Chapter 19.5, Problem 2CC
Summary Introduction

To discuss: The potential pitfalls of analyzing the transactions based on the IRR or cash multiple.

Introduction:

The practitioners of the real world will use the cash multiple and internal rate of return (IRR) to evaluate the transactions.

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Consider the following gasoline sales time series. If needed, round your answers to two decimal digits.   Week Sales (1,000s of gallons) 1 17 2 21 3 19 4 23 5 18 6 16 7 20 8 18 9 22 10 20 11 15 12 22       (a) Show the exponential smoothing forecasts using α = 0.1, and α = 0.2.     ExponentialSmoothing Week α = 0.1 α = 0.2 13     (b) Applying the MSE measure of forecast accuracy, would you prefer a smoothing constant of α = 0.1 or α = 0.2 for the gasoline sales time series?   An   smoothing constant provides a more accurate forecast, with an overall MSE of  . (c) Are the results the same if you apply MAE as the measure of accuracy?   An   smoothing constant provides a more accurate forecast, with an overall MAE of  . (d) What are the results if MAPE is used?   An   smoothing constant provides a more accurate forecast, with an overall MAPE of  .
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