Financial Management

Resource: Ch. 9 in the text

Read Exercises 9.1 on p. 130 & 9.3 on p. 131.

Forecast personnel expenses and total revenues respectively, using weighted moving averages and moving averages.

Explain in 100 to 200 words how financial trends affect forecasting.

Post your final answers as a Microsoft® Word attachment

Exercise 9.1 The following data represent total personnel expenses for the Palmdale Human Service Agency for past four fiscal years: 20X1 $5,250,000 20X2 $5,500,000 20X3 $6,000,000 20X4 $6,750,000 Forecast personnel expenses for fiscal year 20X5 using moving averages, weighted moving averages, exponential smoothing, and time series regression. For moving averages and weighted moving averages, use only the data for the past three fiscal years. For weighted moving averages, assign a value of 1 to the data for 20X2, a value of 2 to the data for 20X3, and a value of 3 to the data for 20X4. For exponential smoothing, assume that the last forecast for fiscal year 20X4 was $6,300,000. You decide on the alpha to be used for exponential smoothing. For time series regression, use the data for all four fiscal years. Which forecast will you use? Why

Exercise 9.3 The following data represent total revenues (from all sources) for the Palmdale Human Service Agency for the past four fiscal years: 20X1 $15,000,000 20X2 $14,250,000 20X3 $14,000,000 20X4 $13,500,000 Forecast total revenues for fiscal year 20X5 using moving averages, weighted moving averages, exponential smoothing, and time series regression. For moving averages and weighted moving averages, use only the data for the past three fiscal years. For weighted moving averages, assign a value of 1 to the data for 20X2, a value of 2 to the data for 20X3, and a value of 3 to the data for 20X4. For exponential smoothing, assume that the last forecast for fiscal year 20X4 was $13,000,000. You decide on the alpha to be used for exponential smoothing. For time series regression, use the data for all four fiscal years. Which forecast will you use? Why?