Refer to Problem 4.2. Develop a forecast for years 2 through 12 using exponential smoothing with a= .4 and a forecast for year 1 of 6

Problem 4.3 Refer to Problem 4.2. Develop a forecast for years 2 through 12 using exponential smoothing with a= .4 and a forecast for year 1 of 6. Plot your new forecast on a graph with the actual data and the naive forecast. Based on a visual inspection, which forecast is better
Year 1 2 3 4 5 6 7 8 9 10 11
Demand 7 9 5 9 13 8 12 13 9 11 7


Click here for the solution: Refer to Problem 4.2. Develop a forecast for years 2 through 12 using exponential smoothing with a= .4 and a forecast for year 1 of 6

The management of Coker Corp. is doing a quick forecast of 20X9 using the modified percentage of sales method

The management of Coker Corp. is doing a quick forecast of 20X9 using the modified percentage of sales method in preparation for a more detailed planning exercise later in the month. The estimate is to assume a 10% growth in sales. All other line items are to be assumed to grow at the same rate except for fixed assets which is projected to increase by $88,000 due to an expansion program already underway. Approximate financial statements for the current year, 20X8, and a planning worksheet are shown below. The firm pays 9% interest on all of its debt. Assume the tax rate is a flat 25%. There are no plans for dividends or the sale of additional stock next year. Make a forecast of Coker’s complete income statement and balance sheet. Work to the nearest thousand dollars. (Hints: The easiest way to grow a number by 10% is to multiply it by 1.1 rather than taking 10% and adding. Do not grow subtotals. For example, to grow Revenue and COGS by 10%, round each to the nearest thousand and subtract for Gross Margin. Don’t grow interest, debt, or equity; use the debt/interest iteration technique.)


Click here for the solution: The management of Coker Corp. is doing a quick forecast of 20X9 using the modified percentage of sales method

The Cambridge Cartage Company has partially completed its forecast of next year’s financial statements as follows

The Cambridge Cartage Company has partially completed its forecast of next year’s financial statements as follows.

Cambridge Cartage Company Financial Plan ($000)
Income Statement Balance Sheet
Next Year Next Year
Revenue $17,220 Beginning Ending
Cost/expenses 14,120 ASSETS
EBIT $3,100 Total assets $12,540 $18,330
Interest ? LIABILITIES & EQUITY
EBT ? Current liabilities $410 $680
Tax ? Debt 5,630 ?
EAT ? Equity 6,500 ?
Total L&E $12,540 $18,330

The firm pays interest at 10% on all borrowings and pays a combined state and federal tax rate of 40%. Complete the forecast income statement and balance sheet. Begin by guessing at interest expense as 10% of beginning debt.


Click here for the solution: The Cambridge Cartage Company has partially completed its forecast of next year’s financial statements as follows

Recently, the annual inflation rate measured by the Consumer Price Index (CPI) was forecast to be 3.3%

E6–4 Recently, the annual inflation rate measured by the Consumer Price Index (CPI) was forecast to be 3.3%. How could a T-bill have had a negative real rate of return over the same period? How could it have had a zero real rate of return? What minimum rate of return must the T-bill have earned to meet your requirement of a 2% real rate of return?

Click here for the solution: Recently, the annual inflation rate measured by the Consumer Price Index (CPI) was forecast to be 3.3%