Oil is selling at a spot price of $41.98 per barrel. Oil can be stored at a cost of $0.42 per barrel per month. The opportunity cost of capital is 0.5% per month. What is the gain or loss realized by an oil refinery that floats its exposure and purchases oil on the spot market in 2 months at a price of $42.62 per barrel, instead of hedging with a forward contract?

You own a well-established energy drink company that sells 50M units per year at a price of $2.50 per unit. The variable cost of producing each unit is $1.00, and the annual fixed cost of operating the business is $50M. The business is all-equity and has an equity beta of 0.90. Assume a risk-free rate of 3 percent and a market risk premium of 6 percent. a) What is the present value of the first five net cash flows (total revenues minus total variable costs minus fixed costs) produced by this business? You are worried about regulation being passed in five years that would limit the amount of caffeine that can be contained in an energy drink. You forecast that you will only be able to sell 34M units per year in perpetuity starting at t-6 if this regulation is passed (the price, variable cost, and fixed cost would remain unchanged). If the regulation is not passed, you will continue selling 50M units per year in perpetuity. b) From the point of view of t=5, what is the present value of…

ABC mines copper with fixed costs of $0.50/lb and variable cost of $0.40/lb. The 1-year forward price of copper is $1/lb. The 1-year continuously compounded interest rate is 6%. If ABC does nothing to hedge copper price risk, what is its profit 1 year from now (per pound of copper)? If, on the other hand, ABC sells forward its expected copper production, what is its estimated 1-yearprofit from now? In both scenarios, assume the spot price of copper in 1 year can be $0.80, $0.90, $1.00, $1.10, and $1.20. 2) Compute ABC’s estimated profit in 1 year if it buys a put option with a strike of $1.00 and a premium of $0.04. Assume the spot price of copper in 1 year can be $0.80, $0.90, $1.00, $1.10, and $1.20.

Randall's Ales & Porters S.A., is considering expanding into Costa Rica. As an incentive, Costa Rica agrees not to charge the company any taxes. The project has the following estimated data: price = $94 per unit variable costs = $50.76 per unit fixed costs = $7,600 required return = 16 percent initial investment = $11,000 life = three years depreciable life = three years, straight-line. Required: (a)What is the accounting break-even quantity? (Do not round your intermediate calculations.) (Click to select) ♥ (b)What is the cash break-even quantity? (Do not round your intermediate calculations.) (Click to select) ♥ (c) What is the financial break-even quantity? (Do not round your intermediate calculations.) (Click to select) ♥