Question

Diwali Airlines has a contract that gives them the opportunity to purchase up to 10,000,.000 jet fuel at $2.00 per gallon. The current market price of jet fuel is $226 per gallon. Diwali believes gallons of they will only need 6,000,000 gallons of jet fuel. What is the value of this opportunity?21) A) $9,040,000 B) $2,600,000 C) $1.040.000 D) $1.560.000

Answer 1

Answer:

Option (D) is correct.

Explanation:

Diwali Airlines has a contract,

Given that,

There is an opportunity to purchase jet fuel upto = 10,000,000 gallons

Price = $2 per gallon

Current market price of jet fuel = $2.26 per gallon

The value of this opportunity:

= Jet fuel needed × (Current market price - $2)

= 6,000,000 gallons × $0.26

= $1,560,000