Question

1. Chris Smith keeps track quarterly data of sport car sold by local car dealer during last 3 years. Download the file from

DataxlsxQ3

and answer the following questions:

A. Create Holt’s method to minimize the MSE for the data set

B. Create Holt-Winter’s additive method to minimize the MSE for the data set

C. Create Holt-Winter’s multiplicative method to minimize the MSE for the data set

D. Use regression analysis to fit an additive seasonal model with linear trend to the data set.

Explain the results (i.e., p-value, R square, and coefficient) (10 points).

DataxlsxQ3
Year	Quarter	Time	Units Sold
2011	1	1	23
	2	2	25
	3	3	36
	4	4	31
2012	1	5	26
	2	6	28
	3	7	48
	4	8	36
2013	1	9	31
	2	10	42
	3	11	53
	4	12	43
2014	1	13	--
	2	14	--
	3	15	--
	4	16	--

2. Oriented Strand Board tries to decide whether they want to produce a new car or not. The company only wants to produce the car if at least 80% chance of having positive NPV over the next ten years. If they introduce the car, they will have to pay the uncertain initial fee (min is $2 billion, max is $2.4 billion, and most likely case is $2.1 billion). First year, they would produce 100,000 units. The demand of first year is uncertain but expected to be normal distribution with mean of 95,000 and standard deviation of 7,000. For any year in which the demand exceeds production, production will be increased by 5% in the following year. For any year in which the product exceeds demand, production will be decreased by 5% in the next year, and the excess cars will be sold to other companies at a 20% discount. After first year, the demand in any year is a normal distribution with a mean equal to the actual demand in previous year and standard deviation of 7,000. In first year, the sales price of the car will be $13,000 and the total variable cost per car is expected to be $9,500. Both the selling price and variable cost is expected to increase each year in the uniform distribution between 2% and 7%. The company uses a discount rate of 9% to discount future cash flows.

A. Create best case, worst case, and most likely case simulation

B. Create a spreadsheet simulation for this problem.

Hint: Use NPV() function to discount the profits Oriented Strand Board would earn each year

Answer 1

answer:-

C. Using Holt-Winter's Multiplicative Method