Question: Lakeroad, a manufacturer of hard disks for personal computers, was founded in 1981 and has sold the following numbers of disks:
a. Suppose the firm uses Holt's method for forecasting sales. Assume S0 = 0 and G0 = 8. Using α = .2 and β = .2, find one-step-ahead forecasts for 1982 through 1989 and compute the MAD and MSE for the forecasts lining this period. What is the sales forecast for the year 2000 made at the end of 1988? Based on the read. of 1988, why might this forecast he very inaccurate?
b. By experimenting with various values of α and β, determine the values of the smoothing constants that appear to give the most accurate forecasts.