Answer: $60.62
Explanation:
Using the Gordon Growth model;
Value = Next dividend / (Required return - growth rate)
Next dividend in 5th year will be dividend in 6th year;
= 7 * (1 + 2%)⁶
= $7.88
Value₅ = 7.88 / (15% - 2%)
= $60.62
alph owns a building that he is trying to lease. Ralph is a calendar-year, cash-method taxpayer and is trying to evaluate the tax consequences of three different lease arrangements. Under lease 1, the building rents for $500 per month, payable on the first of the next month, and the tenant must make a $500 security deposit that is refunded at the end of the lease. Under lease 2, the building rents for $5,500 per year, payable at the time the lease is signed, but no security deposit is required. Under lease 3, the building rents for $500 per month, payable at the beginning of each month, and the tenant must pay a security deposit of $1,000 that is to be applied toward the rent for the last two months of the lease. (Leave no answers blank. Enter zero if applicable.) a. What amounts are include
Answer:
if the tenant signs the lease contract 1 on December 1, Ralph will not include any income in his current tax year. Security deposits are not considered income. if the tenant signs lease contract 2, Ralph will have to include $5,500 in his income for the current year. if the tenant signs lease contract 3, Ralph will have to include $1500 in his income for the current year. The $1,000 security deposit represents the last two monthly lease payments.Vijay Inc. purchased a three-acre tract of land for a building site for $260,000. On the land was a building with an appraised value of $128,000. The company demolished the old building at a cost of $11,300, but was able to sell scrap from the building for $1,670. The cost of title insurance was $830 and attorney fees for reviewing the contract were $420. Property taxes paid were $3,300, of which $170 covered the period subsequent to the purchase date. The capitalized cost of the land is:
Answer:
$273,840
Explanation:
The Cost of of an item of Property, Plant and Equipment according to IAS 16 include the purchase price and any directly related costs incurred in bringing the asset in the condition and location for operation as intended by management.
Calculation of the Cost of Land
Purchase Price $260,000
Cost after proceeds to demolish old building($11,300 - $1,670) $9,630
Insurance $830
Legal Fees $420
Property taxes ( $3,300 - $170) $3,130
Capitalized Cost $273,840
9- Demand for It-is-Hot-Outside fresh ice-cream is (continuous) uniform between 55 and 255 lbs. Profit on each pound of ice-cream is $16. This ice-cream is made in one batch at the begging of the day and any left-over ice cream at the end of the day will be discarded. It costs about $9 to prepare a pound of ice-cream. How much ice-cream (in lbs) should be prepared at the beginning of the day in order to maximize the profit
Answer: 183
Explanation:
Based on the information given in the question,
Cost of excess (Ce) = 9$
Cost of shortage (Cs) = 16$
Service level = Cs/(Cs+Ce)
= 16/(16+9)
= 16/25
= 0.64
Lower limit = 55
Upper limit = 255
We then calculate the optimal quantity which will be:
= Lower limit + Service level × (Upper limit - Lower limiit)
= 55 + 0.64 × (255-55)
= 55 + (0.64 × 200)
= 55 + 128
= 183
Therefore, to maximize profit, 183 ice cream should be prepared.
The quantity of ice-cream (in lbs) that should be prepared at the beginning of the day in order to maximize the profit is 183 ice cream.
First step is to calculate the service level using this formula
Service level = Cs/(Cs+Ce)
Where:
Cost of shortage (Cs) = $16
Cost of excess (Ce) = $9
Let plug in the formula
Service level= 16/(16+9)
Service level= 16/25
Service level= 0.64
Second step is to calculate the optimal quantity using this formula
Optimal quantity=Lower limit + Service level × (Upper limit - Lower limit)
Where:
Lower limit = 55
Upper limit = 255
Service level= 0.64
Let plug in the formula
Optimal quantity= 55 + 0.64 × (255-55)
Optimal quantity= 55 + (0.64 × 200)
Optimal quantity= 55 + 128
Optimal quantity= 183
Inconclusion the quantity of ice-cream (in lbs) that should be prepared at the beginning of the day in order to maximize the profit is 183 ice cream.
Learn more optimal quantity here:https://brainly.com/question/13882364
Chapel Hill Company had common stock of $350,000 and retained earnings of $490,000. Blue Town Inc. had common stock of $700,000 and retained earnings of $980,000. On January 1, 2011, Blue Town issued 34,000 shares of common stock with a $12 par value and a $35 fair value for all of Chapel Hill Company's outstanding common stock. This combination is accounted for as an acquisition. Immediately after the combination, what was the consolidated net assets
Answer: $2,870,000
Explanation:
Based on the information given in the question, the consolidated net assets will be calculated as:
= ($34,000 × 35) + $700,000 + $980,000
= $1,190,000 + $700,000 + $980,000
= $2,870,000
Therefore, the the consolidated net assets is $2,870,000.
Assume a firm is purchasing new equipment for a project. The selling price of the product along with the variable cost, fixed costs and annual depreciation expense have been determined. The firm is about to calculate its accounting, cash and financial break even points. Which break even points will the project reach first, then second and finally last
Answer:
cash break even point first followed by the accounting break even point and then finally the financial break even point.
Explanation:
As we know that
The cash break even point is
= Fixed Cost ÷ Contribution Margin
The Accounting Break Even Point is
= (Fixed Cost + Depreciation) ÷ Contribution Margin
And, the Financial Break Even Point is
= (Fixed Cost + Depreciation + Interest) ÷ Contribution Margin
So as we can see that the first the cash break even point, than the accounting break even point and the last is financial break even point
So, the first option is correct
For companies that sell goods or services on account, if revenue is recognized prematurely, what would be overstated: sales or accounts receivable
Answer:
Both sales and account receivable
Explanation:
In the case when the company sells the goods or services on an account and the revenue is to be recorded prematurely so here the both accounts i.e. sales and the account receivable are overstated as it impacts these two accounts
Therefore the same is to be considered
hence, Both sales and account receivable are overstated
The Burdell Wheel and Tire Company assembles tires to wheel rims for use on cars during manufacture of vehicles by the automotive industry. Burdell wants to locate a low-cost supplier for the tires he uses in his assembly operation. The supplier will be selected based on total annual cost to supply Burdell's needs. Burdell's annual requirements are for 25,000 tires, and the company operates 250 days a year. The following data are available for two suppliers being considered.SUPPLIER SHIPPING QUANTITY PER SHIPMENT SHIPPING COSTS PRICE / TIRE (p) INVENTORY HOLD COSTS (H) LEAD TIME (DAYS) ADMIN. COSTSLEXINGTON TIRE2,000 $18,000 $30 $6.00 6 $15,000IRMO AUTO1,000 $25,000 $29 $5.80 4 $18,000Using the Total Cost Analysis for Supplier Selection, which supplier should Burdell choose? Provide details to justify your answer.
Answer:
LEXINGTON TIRE provides a higher unit cost but, a lower inventory cost overall considering the ordering, holding cost, and administrative cost generated.
The company should pick LEXINGTON TIRE
Explanation:
LEXINGTON TIRE
SHIPPING QUANTITY PER SHIPMENT 2,000
SHIPPING COSTS 18,000
PRICE per TIRE 30
INVENTORY HOLD COSTS (H) 6.00
LEAD TIME (DAYS) 6
ADMIN. COSTS 15,000
Total cost: 25,000 / 2,000 = 12.5 per year
shipment cost: $18,000 per shipment x 12.5 per year = 225,000
Materials cost:
25,000 tires x $30 per tire = 750,000
Holding cost:
lead time + average inventory
6 days x 100 tires + 2,000 tires / 2 = 1,600 tires on average
times $6 holding cost = 9,600
Total cost: Inventory 225,000 + 750,000 materials + 9,600 holding + 15,000 admin
total 999,600
IRMO AUTO
SHIPPING QUANTITY PER SHIPMENT 1,000
SHIPPING COSTS 25,000
PRICE per TIRE 29(p)
INVENTORY HOLD COSTS (H) 5.80
LEAD TIME (DAYS) 4
ADMIN. COSTS 18,000
Shipping per year: 25,000 / 1,000 = 25
Ordering cost: 25 shipment x 25,000 = 625,000
Materials:
25,000 x 29 = 725,000
Holding:
lead time + average inventory
4 days x 100 + 1000/2 = 900 units on inventory throughout the year
Holding cost: 900 x $5.80 = 5,220
Total Inventory cost:
Ordering 625,000 + materials 725,000 + 5,220 holding + 18,000 admin
total = 1,355,220
Mcniff Corporation makes a range of products. The company's predetermined overhead rate is $19 per direct labor-hour, which was calculated using the following budgeted data: Variable manufacturing overhead $ 32,000 Fixed manufacturing overhead $ 272,000 Direct labor-hours 16,000 Management is considering a special order for 730 units of product O96S at $67 each. The normal selling price of product O96S is $78 and the unit product cost is determined as follows: Direct materials $ 40.00 Direct labor 15.00 Manufacturing overhead applied 19.00 Unit product cost $ 74.00 If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order. Required: The financial advantage (disadvantage) for the company as a result of accepting this special order would be:
The following information is available regarding John Smith's capital account in Technology Consulting Group, a general partnership, for a recent year: Beginning of the year balance $ 32,000 His share of partnership income $ 11,000 Withdrawals made during the year $ 7,000 What is Smith's partner return on equity during the year in question
Answer:
32.35%
Explanation:
Calculation for What is Smith's partner return on equity during the year in question
First step is to calculate the Ending partner equity
Ending partner equity = $32,000 + $11,000 - $7,000
Ending partner equity = $36,000
Now let calculate the partner return on equity
Partner return on equity= $11,000 / (($32,000 + $36,000)/2)
Partner return on equity= $11,000/($68,000/2)
Partner return on equity= $11,000/$34,000
Partner return on equity= 32.35%
Therefore Smith's partner return on equity during the year in question will be 32.35%
Bonds are considered fixed-income securities because they pay a fixed amount of interest per quarter or per year for the term of the loan.
True or false
Answer:
Bonds are considered fixed-income securities because they pay a fixed amount of interest per quarter or per year for the term of the loan.
True
Explanation:
The Federal, State, or Municipal Governments and some well-known and established corporations may issue bonds as a form of long-term borrowing to fund their activities. Bonds, traditionally, pay a fixed interest rate to the bondholders or debtholders per indicated periods. Because Bonds pay some fixed incomes, they are regarded as fixed-income debt securities or instruments. Nowadays, some bonds are known to pay variable or floating interest rates.
Bad Brad's BBQ had cash flows for the year as follows ($ in millions): CASH RECEIVED FROM: Customers $ 3,100 Interest on investments 220 Sale of land 110 Sale of common stock 550 Issuance of debt securities 2,500 CASH PAID FOR: Interest on debt $ 320 Income tax 150 Debt principal reduction 1,450 Purchase of equipment 4,400 Purchase of inventory 900 Dividends on common stock 190 Operating expenses 800 Bad Brad's would report net cash inflows (outflows) from financing activities in the amount of: Multiple Choice $1,520. $(1,520). $1,260. $1,410.
Answer:
Net cash inflow from financing activities $1,410
Explanation:
The computation of the net cash inflows or outflows from financing activities is shown below
Cash flow from financing activities
Sale of common stock $550
Issuance of debt securities $2,500
Less debt principal reduction -$1,450
Less dividend on common stock -$190
Net cash inflow from financing activities $1,410
Hence, the last option is correct
Marigold Corp. incurred the following costs for 52000 units: Variable costs $312000 Fixed costs 392000 Marigold has received a special order from a foreign company for 2000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $2400 for shipping. If Marigold wants to earn $4000 on the order, what should the unit price be
Answer:
The unit price is $9.2 per unit
Explanation:
The computation of the unit price is shown below
Variable costs for 2,000 units is
= Variable cost ÷ units × special order units
= $312,000 ÷ 52,000 units × 2,000 units
= $12,000
Now the unit price is
= (variable cost + shipping charges + earnings) ÷ special order units
= ($12,000 + $2,400 + $4,000) ÷ (2,000 units)
= $9.2 per unit
Hence, the unit price is $9.2 per unit
The same is to be considered
What was the impact of "subprime" mortgages on the economy?
A.They increased defaults and caused large losses at financial institutions.
B.They initially reduced profits and sales of lenders.
C. They reduced interest rates.
Answer:
A.They increased defaults and caused large losses at financial institutions.
Explanation:
'Subprime" mortgages were home homes offered in the early 2000s to borrowers with low and poor credit history. By the time of issues, the interest rates were relatively low, which meant that subprime borrowers who usually attract high-interest rates were approved for mortgages. The demand for housing grew exponentially as borrowers with good and poor credit history alike tool mortgages. The price for houses continued to rise, prompting the Fed to raise the interest rate to contain inflation.
Between 2205 and 2006, house prices collapsed suddenly. Interest rates were rising, but house prices were dropping. Many homeowners were unable to repay their mortgages. The interest and principle there are paying were very high compared to the market value for the homes. There were massive layoffs by subprime mortgage lenders, while others closed down or applied for bankruptcy. The decline in prices implied that the mortgage value was high compared to the market price for houses.
United Disposal, Inc., operates a hazardous waste disposal site that accepts waste transported by Ace Trucking Company from General Manufacturing Corporation. United sells the site to Investment Properties, Inc. A release of the waste is discovered at the site, and the Environmental Protection Agency (EPA) cleans it up. The EPA can recover the cost of the cleanup from
Answer:
United Disposal, General Manufacturing Corporation, Ace Trucking Company, and/or Investment Properties.
Explanation:
When the EPA cleans up site, it generally uses money from its superfund and it is allowed to recover the money from the entity that caused the pollution (either directly or indirectly), the owner of the premise or the user of the premise. I.e. they can recover the funds from anyone involved. The EPA will try to recover the funds based on several aspects including the financial position of the entities involved. E.g. if United Disposal, Ace Trucking Company and General Manufacturing Company filed for bankruptcy, the EPA will recover the funds from Investiture Properties even if they were not responsible for the pollution.
(LO 7) The Gardner Company expects sales for October of $238,000. Experience suggests that 45% of sales are for cash and 55% are on credit. The company collects 50% of its credit sales in the month of sale and 50% in the month following sale. Budgeted Accounts Receivable on September 30 is $62,000. What is the amount of Accounted Receivables on the October 31 budgeted balance sheet?
Answer:
$65,450
Explanation:
Calculation for the amount of Accounted Receivables on the October 31 budgeted balance sheet
Using this formula
Accounted Receivables on the October 31 budgeted balance sheet=Credit sales*October sales*Credit sales
Let plug in the formula
Accounted Receivables on the October 31 budgeted balance sheet=(55% * 238,000 *50%)
Accounted Receivables on the October 31 budgeted balance sheet=$65,450
Therefore the amount of Accounted Receivables on the October 31 budgeted balance sheet will be $65,450
what is the meaning of building economics
Answer:chicken
Baby
Explanation:
Explanation:
building economics basically means ur building something in a good way whether its money or value in something it basically grows over time
Jia's Fashions recently paid a $2 annual dividend. The company is projecting that its dividends will grow by 20 percent next year, 12 percent annually for the two years after that, and then at 6 percent annually thereafter. Based on this information, how much should Jia's Fashions common stock sell for today if her required return is 10.5%?
Answer:
years late but here ya go (answer $59.16)
Explanation:
P0 = 2 * (1+0.2) / (1+0.105) + 2 * (1+0.2) * (1+0.12) / (1+0.105)^2 +
2*(1+0.2)*(1+0.12)^2 / (1+0.105)^3 +
[(2 * (1+0.2) * (1+0.12)^2 * (1+0.06) / (0.105-0.06)) / (1+0.105)^3 ]
P0 = $59.16
What is the difference between holistic case study and embedded case study, provide a simple example?
Answer:
A holistic case is one where the case is the unit of analysis; an embedded one is where there are several units of analysis in the case. For example, a case could be about a school and its response to a new demographic trend or government edict, in which case it would be holistic.
Explanation:
I looked it up lol
The Lechwe Company's December 31 pre-reconciliation cash balance on its books was $93,000. As of December 31, outstanding checks total $45,200 and deposits in transit total $30,600. Assuming there are no other reconciling items, what was the December 31 cash balance on Lechwe's bank statement
Answer:
$107,600
Explanation:
The cash balance on Lechwe' bank would be calculated as;
Cash balance = Corrected cash book balance + Outstanding cheques - Deposit in transit
Given that;
Corrected cash book balance = $93,000
Outstanding cheques = $45,200
Deposit in transit = $30,600
= $93,000 + $45,200 - $30,600
= $107,600
Therefore, the December 31 cash balance on Lechwe's bank statement is $107,600
Cox, North, and Lee form a partnership. Cox contributes $183,000, North contributes $152,500, and Lee contributes $274,500. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $172,000 for its first year, what amount of income is credited to Lee's capital account
Answer:
$77,400
Explanation:
Lee's ratio = $274,500 / ($183,000 + $152,500+ $274,500)
Lee's ratio = $274,500 / $610,000
Lee's ratio = 0.45
Lee's ratio = 45%
Lee's ratio = Lee's profit ratio
If the partnership reports income of $172,000.
Lee's income will be = 45%*$172,000 = $77,400
Thus, the amount of income to be credited to Lee's capital account is $77,400
If total liabilities increased by $77000 during a period of time and stockholders’ equity decreased by $43500 during the same period, then the amount and direction (increase or decrease) of the period’s change in total assets is a(n)
Answer: Assets increased by $33,500
Explanation:
Assets = Liabilities + Equity
Liabilities increased by $77,000
Equity decreased by $43,500
Difference = 77,000 - 43,500
= $33,500
Assets increased by $33,500
Vilas Company is considering a capital investment of $190,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $12,000 and $50,000, respectively. Vilas has a 12% cost of capital rate, which is the required rate of return on the investment.
Answer:
a. 3.8 years
b. 12.63%
c. -$9,761.19
Explanation:
a. Cash Payback period.
The amount of time it would take for cash inflows to offset the initial outflow (investment).
= Investment/ Annual inflow
= 190,000 / 50,000
= 3.8 years
b. Annual income / Average Assets
= 12,000 / ( (190,000 + 0) / 2)
= 12.63%
c. Annual inflow is $50,000 for 5 years. Net present value is the present value of inflows less investment
Present value of inflows = 50,000 * (1 - ( 1 + 12%)⁻⁵ / 12%)
= $180,238.81
Net Present Value = 180,238.81 - 190,000
= -$9,761.19
a. Calculating the Cash Payback period:
Cash Payback period refers to the amount of time it would take for cash inflows to offset the initial outflow
Cash Payback period = Investment/ Annual inflow
Cash Payback period = 190,000 / 50,000
Cash Payback period = 3.8 years
b. Calculating the annual rate of return on the proposed capital expenditure:
Annual rate of return = Annual income / Average Assets
Annual rate of return = $12,000 / (($190,000 + 0) / 2)
Annual rate of return = $12,000 / $95,000
Annual rate of return = 0.126315789
Annual rate of return = 12.63%
c. Annual inflow is $50,000 for 5 years.
Net present value is the present value of inflows less investment
Present value of inflows = Annual inflow * (1 - (1 + i)^-n / i)
Present value of inflows = $50,000 * (1 - (1 + 12%)^-5 / 12%)
Present value of inflows = $180,238.81
Net Present Value = Present value of inflows - initial outflow
Net Present Value = 180,238.81 - 190,000
Net Present Value = -$9,761.19
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Inventory is often reported as a miscellaneous expense on the income statement. reported as a current asset on the balance sheet. generally valued at the price for which the goods can be sold. reported under the classification of Property, Plant, and Equipment on the balance sheet.
Answer:
reported as a current asset on the balance sheet.
Explanation:
According to US GAAP, inventory must be reported at lower of cost or market value. ⇒ Therefore, "generally valued at the price for which the goods can be sold." is wrong.
Inventory is included under current assets since it is considered relatively liquid. ⇒ Therefore, "reported under the classification of Property, Plant, and Equipment on the balance sheet." is wrong.
Inventory is not an expense, cost of goods sold is an expense account. ⇒ Therefore, "reported as a miscellaneous expense on the income statement." is wrong.
Valley Manufacturing reported sales of $800,000, net operating income of $40,000, and average invested assets of $400,000. Based on this, Valley's investment turnover is:_____
Answer:
2
Explanation:
Calculation for Valley's investment turnover
Using this formula
Investment turnover=Sales/Average invested assets
Let plug in the formula
Investment turnover=$800,000/$400,000
Investment turnover=2
Therefore Valley's investment turnover is 2
Bonita Industries reported net income of $58000 for the year ended December 31, 2021 Included in net income were depreciation expense of $8800 and a gain on sale of equipment of $2200. Each of the following accounts increased during 2021: Accounts receivable $2800 Inventory $4100 Prepaid rent $7400 Available-for-sale securities $1100 Accounts payable $4800 What is the amount of cash provided by operating activities for Bonita Industries for the year ended December 31, 2021?
Answer:
the Cash provided by operating activities is $55,100
Explanation:
The computation of the cash provided by operating activities is shown below;
Cash provided by operating activities:
= Net income + Depreciation - Gain on sale or asset - Increase in accounts receivable - Increase in inventory - Increase in prepaid rent + Increase in accounts payable
= $58,000 + $8,800 - $2,200 - $2,800 - $4,100 - $7,400 + $4,800
= $55,100
Hence, the Cash provided by operating activities is $55,100
Bird Brain Co. reported net income of $46,500 for the year ended December 31, 2021. January 1 balances in accounts receivable and accounts payable were $23,000 and $24,500 respectively. Year-end balances in these accounts were $21,000 and $29,800, respectively. Assuming that all relevant information has been presented, Bird Brain's cash flows from operating activities would be: Multiple Choice $46,500. $39,200. $53,800. $49,800.
Answer:
$53,800
Explanation:
Cash flow from operating activities = Net income + ( Beginning accounts receivable - Ending accounts receivable) + ( Ending accounts payable - Beginning accounts payable)
= $46,500 + ($23,000 - $21,000) + ($29,800 - $24,500)
= $46,500 + $2,000 + $5,300
= $53,800
Therefore, Bird's brain cash flow from operating activities is $53,800
For the current year ($ in millions), Central Park Corp. had $80 in pretax accounting income. This included bad debt expense of $6 based on the allowance method, and $20 in depreciation expense. Two million in receivables were written off as uncollectible, and MACRS depreciation amounted to $35. In the absence of other temporary or permanent differences, what was Central Park's taxable income
Answer:
$69
Explanation:
Calculation for Central Park's taxable income
Pretax accounting income $80
Less Temporary differenceDepreciation (15)
($35 – $20)
Bad debt expense $4
($6 – $2)
Taxable income$69
($80-$15+$4)
Therefore Central Park's taxable income will be $69
Consumers Choice store accepts a shipment of EZ2U-brand tablets from Digital Devices, Inc. Consumers Choice later discovers a defect in the tablets, revokes acceptance, and returns the tablets via GoBack, Inc. During the return, the tablets are lost. The loss is suffered by
Answer:
Digital devices
Explanation:
Since in the question it is mentioned that the consumer choice found the defect in the tablets and the return the same. While returning it, the tables are lost so here the loss suffered by the digital devices as the devices are defective so the loss would be born by them only
Therefore as per the given situation, the above represents the answer
A company's income statement showed the following: net income, $132,000; depreciation expense, $39,000; and gain on sale of plant assets, $13,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $11,200; merchandise inventory increased $27,000; prepaid expenses increased $8,000; accounts payable increased $5,200. Calculate the net cash provided or used by operating activities.
Answer:
Net Cash provided (used by) operating activities $139,400
Explanation:
The computation of the net cash provided or used by the operating activities is as follows"
Cash flow from operating activities
Net Income $132,000
Adjustments:
Add Depreciation expense $39,000
Less: Gain on sale of plant assets ($13,000)
Add: Decreased in accounts receivables $11,200
LesS: Increase in inventory ($27,000)
Less: Increase in prepaid expense ($8,000)
Add: Increase in accounts payable $5,200
Net Cash provided (used by) operating activities $139,400
You’re the purchasing manager for a large trucking company, worried about a spike in oil prices come January 15 when you typically buy your diesel fuel. You estimate you’ll need 200,000 barrels. The spot price is $60/barrel. Which of the following will hedge your risk of oil prices rising between now and then? Enter into a forward contract today to purchase 200,000 gallons of diesel on January 15 from the counterparty at $61/barrel. Enter into a forward contract today to sell 200,000 gallons of diesel on January 15 to the counterparty at $61/barrel. Enter into a forward contract today to purchase 200,000 barrels of diesel on January 15 from the counterparty at whatever the market price is then. Enter into a forward contract today to sell 200,000 barrels of diesel on January 15 to the counterparty at whatever the market price is then.
Answer:
Enter into a forward contract today to purchase 200,000 gallons of diesel on January 15 from the counterparty at $61/barrel.
Explanation:
Since in the given situation, it is mentioned that there is a spike in oil prices that comes on Jan 15 an estimated required barrels is 200,000 also the spot price is $60 per barrel so in order to hedge the risk we should entered into a forward contract today to acquire 200,000 diesel gallon as on Jan 15 from the counter party at $61 per barrel also the price is freezed
The same is to be considered
