Answer:
i. buy put option
ii. Proceeds will be as follows:
$50 : 2,000,000
$60 : 2,400,000
$70 : 2,800,000
$80 : 3,200,000
Explanation:
i. A put is option is one in which buyer of the option has a right to sell the asset at an agreed price at a later date. There can be a premium on the purchase of an option but its safe to buy an option to reduce risk exposure.
ii. $50 : 2,000,000 (40,000 barrels * $50)
$60 : 2,400,000 (40,000 barrels * $60)
$70 : 2,800,000 (40,000 barrels * $70)
$80 : 3,200,000 (40,000 barrels * $80)
Answer:
a. $78
Explanation:
In a first-price auction, all bidders simultaneously submit sealed bids, with that approach, no bidder knows the bid of any other participant and then the bidder with the highest bid purchases the item for the specified amount. If the highest value is $78, the item will sell for exactly $78.
Answer: The break-even point is 66 units.
Explanation:
The break-even point can be found by dividing total fixed costs by the difference between selling price and variable cost.
(fixed cost) / (sale price - variable cost)
1980 / (50 - 20) = 66 units
Salt & Battery must sell 66 units of product before breaking even.
Answer
The answer and procedures of the exercise are attached in the following image.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.