Linear!Regression!

Exercise

In creating!a!4!year!forecast!for!your!company,!you!want!to!project!future!revenue!based!
on!historical!revenue.!!Using!actual!revenue!form!2001"2008,!project!revenues!for!2009!
thru!2012!as!follows:

1)!using!the!FORECAST!function!in!Excel,!and

2)!using!the!TREND!function!in!Excel.!Also,

3)!create!a!line!graph!illustrating!actual!and!projected!revenues!from!2001!to!2013!for!a!
budget!meeting.

Projected!Revenue!(in!000's)
Actual!Revenue!(in!
Year 000's) Using!FORECAST Using!TREND
2001 $!!!!!!!!!!!!!!!!!!!50,000
2002 $!!!!!!!!!!!!!!!!!!!54,000
2003 $!!!!!!!!!!!!!!!!!!!62,000
2004 $!!!!!!!!!!!!!!!!!!!66,500
2005 $!!!!!!!!!!!!!!!!!!!69,000
2006 $!!!!!!!!!!!!!!!!!!!76,000
76,000
2007 $!!!!!!!!!!!!!!!!!!!77,000
2008 $!!!!!!!!!!!!!!!!!!!87,500

2009
2010
2011
2012

Adapted!by:!SJ,!UMUC,!2009
 Linear!Regression!Solution

Predicting Values Using FORECAST and TREND

Projected!Revenue!(in!000's)
Actual!
Revenue!(in!
Year 000's) Using!FORECAST Using!TREND
2001 $!!!!!50,000
2002 $!!!!!54,000
2003 $!!!!!62,000
2004 $!!!!!66,500
2005 $!!!!!69,000
2006 $!!!!!76,000
2007 $!!!!!77,000
2008 $!!!!!87,500

2009 $!!!!!!!!!!!!!!!!!!!!!!!!!!!!90,357 $!!!!!!!!!!!!!!!!!!!!!!!!!!! 90,357

2010 $!!!!!!!!!!!!!!!!!!!!!!!!!!!!95,381 $!!!!!!!!!!!!!!!!!!!!!!!!!!! 95,381
2011 $!!!!!!!!!!!!!!!!!!!!!!!!!!100,405 $!!!!!!!!!!!!!!!!!!!!!!!!! 100,405
2012 $!!!!!!!!!!!!!!!!!!!!!!!!!!105,429 $!!!!!!!!!!!!!!!!!!!!!!!!! 105,429

!
Revenue!(in!
Year 000's)
2001 $!!!!!50,000
2002 $!!!!!54,000
2003 $!!!!!62,000
2004 $!!!!!66,500
2005 $!!!!!69,000
2006 $!!!!!76,000
2007 $!!!!!77,000
2008 $!!!!!87,500
2009 $!!!!!90,357
2010 $!!!!!95,381
2011 $!!!100,405
2012 $!!!105,429

Adapted!by:!SJ,!UMUC,!2009
 Linear!Regression!Solution:!Chart

Revenue!(in!000's)*
$120,000!

$100,000!

$80,000!

$60,000!

$40,000!

$20,000!

$"
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

*!Actual!from!2001!"!2008,!projected!from!2009!"!2012

Adapted!by:!S.!Justin,!2009,!Sengupta!pg.!216