Question: (15 points) Income (in $ millions) at the Biomedical firm Life Tech for the period February to July was as follows:

Month Income (in $ millions)

February 70.0

March 68.5

April 64.8

May 71.7

June 71.3

July 72.8

1. Use trend- adjusted exponential smoothing to forecast the firm’s August income. Assume that the initial forecast average for February is $ 65 million and the initial trend adjustment is 0. The smoothing constants selected are α=0.1 and β=0.2.
2. Resolve the problem with α=0.1 and β=0.8.
3. Using MSE, determine which smoothing constants provide a better forecast.

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