The IRS is actively encouraging individuals to file their taxes electronically in order to increase accuracy and reduce expenses. The following data show the percentage of tax returns filed electronically from 2003 to 2012. These data can also be found in the Excel file electronic filing.xlsx.

Year Percentage Year Percentage 2003 40 2008 58 2004 47 2009 67 2005 51 2010 70 2006 54 2011 77 2007 57 2012 78 Based on: IRS data.

a. Forecast the percentage of tax returns that will be electronically filed for 2013 using exponential smoothing with a = 0.4.

b. Calculate the MAD for the forecast in part a.

c. Forecast the percentage of tax returns that will be electronically filed for 2013 using exponential smoothing with trend adjustment. Set a = 0.4 and b = 0.6.

d. Calculate the MAD for the forecast in part c.

e. In which forecast do you have the most confidence?

Why?

AppendixLO1