Baking profits. A supermarket is currently studying the possibility of closing its bakery division as it has registered losses for the past two years. They would like to predict the annual profit for next year based on data from 2014 to 2018.

Fiscal Year Profits ($)
2014 30,543 2015 34,975 2016 15,460 2017 -4,020 2018 -12,225

a) Use a 4-year moving average (MA) to predict profits for 2019.

b) Predict the profits for 2019 using a single exponential smooth with smoothing parameter a = 0.5.

c) Think about the exponential smoother. If the parameter were 0.7, would you expect the prediction to be higher or lower? What if it were 0.1? Explain.