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1. The president of a water power company is worried about the possibility of a takeover attempt and the fact that the number of common

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1. The president of a water power company is worried about the possibility of a takeover attempt and the fact that the number of common shareholders (1:) has been decreasing since 1983. (S)he instructs you to study the number of common shareholders since 1925 and forecast for 2003 and 2004. You decide to investigate three potential predictor variables: X I, = earnings per share (common), X 3, = dividends per share (common), and X 3, = payout ratio. You collect the data from 1925 to 2002 as shown below. (Adapted from Problem 12, HW, pp. 321-372 in Chapter 8). 1.1 Find the best regression forecasting model. (Note: Find a structural forecasting model.) 1.2 Is autocorrelation a problem in your model? Is multicollinearity a problem? 1.3 If autocorrelation is a problem, how to resolve the problem and modify your model before it is used for forecasting? 1.4 Forecast Y2003 and Yzaoa given your forecasts of X\

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