Here are earnings per share for two companies by quarter from the first quarter of 2009 through the second quarter of 2012. Forecast earnings per share for the rest of 2012 and 2013. Use exponential smoothing to forecast the third period of 2012, and the time series decomposition method to forecast the last two quarters of 2012 and all four quarters of 2013. (It is much easier to solve this problem on a computer spreadsheet so you can see what is happening.)

		EARNINGS PER SHARE
	QUARTER	COMPANY A		COMPANY B
2009	I	$ 1.64		$ 0.16
	II	2.36		0.26
	III	1.16		0.23
	IV	1.21		0.32
2010	I	1.62		0.24
	II	2.04		0.33
	III	1.19		0.34
	IV	0.29		0.45
2011	I	0.29		0.31
	II	0.23	(loss)	0.46
	III	0.93	(loss)	0.45
	IV	0.40		0.47
2012	I	1.61	(loss)	0.27
	II	0.34		0.47

a.	For the exponential smoothing method, choose the first quarter of 2009 as the beginning forecast. Make two forecasts: one with = 0.20 and one with = 0.30. (Negative values should be indicated by a minus sign. Round your answers to 3 decimal places.)

	Company A			Company B
Quarter	Forecast = 0.20	Forecast = 0.30		Forecast = 0.20	Forecast = 0.30
2009 I
II
III
IV
2010 I
II
III
IV
2011 I
II
III
IV
2012 I
II
III

b-1.	Calculate the MAD for each forecast using data starting with second quarter of 2009 through second quarter of 2012. (Round your answers to 3 decimal places.)

	MAD
	Company A	Company B
= 0.20
= 0.30

b-2.	Using the MAD method of testing the forecasting model's performance, plus actual data from 2009 through the second quarter of 2012, how well did the model perform?

Based upon MAD,

performs better than an of

.

c.	Using the decomposition of a time series method of forecasting, forecast earnings per share for the last two quarters of 2012 and all four quarters of 2013. (Negative values should be indicated by a minus sign. Round your answers to 3 decimal places.)

	Company A			Company B
Quarter	Seasonal Factor	Forecast		Seasonal Factor	Forecast
2012 III
IV
2013 I
II
III
IV

d.	Using your forecasts, comment on each company.

Company A's EPS is an

Company B's EPS is an