Advise tom on how he can hedge his risk of fluctuations

Assignment Help Accounting Basics
Reference no: EM133159455

Question - Tom Sweet, a melon farmer, has asked you to advise him on how he can protect himself against an adverse price movement regarding the sale of his melons using futures contract.  He expects to have 1,500 tonnes of melon for sale in the summer.  It is now early January and the cash price for melons is $350 per tonne.  The settle price on a futures contract to sell melons in June is $330 per tonne.

Required - Advise Tom on how he can hedge his risk of fluctuations using the futures market and demonstrate the calculation of Tom's resulting gain or loss if the cash price for melons is

a) $300 per tonne in June and the settle price on a futures contract to buy melons is $320 per tonne.

b) $360 per tonne in June and the settle price on a futures contact to buy melons is $380 per tonne.

Reference no: EM133159455

Questions Cloud

What sources of specialist information are available : What sources of specialist information are available and how are they relevant to performance evidence issues?
Case study-cross-cultural issues at aero : Imagine that you have recently been hired as a human resources consultant by a Canadian multinational enterprise (MNE) called Aero. Aero designs, manufactures a
Evaluate the national forests as recreational resources : Evaluate the national forests as recreational resources.
How is leadership defined for peter northouse : How is leadership defined for Peter Northouse, according to the definition answer :Is Leadership available to everyone? Explain.
Advise tom on how he can hedge his risk of fluctuations : Advise Tom on how he can hedge his risk of fluctuations using the futures market and demonstrate the calculation of Tom's resulting gain or loss
Increasing patient safety and quality care : Consider the following in your 15-slide presentation: Executive summary or agenda
What is the role and impact of older employees : What is the role and impact of older employees in an age-diverse organization? (Use goal setting theory or organizational cycle theory or other HRM-related theo
Investigate the feasibility of using a virtual reality : Use of Technology Since the two teams operate in different locations, senior management wants you to investigate the feasibility of using a virtual reality / on
Calculate the expected market value of the merged firm : Calculate the expected market value of the merged firm and advise Whinn Ltd. whether they should go ahead with the merger

Reviews

Write a Review

Accounting Basics Questions & Answers

  Discuss how much do they have increase their sales revenue

If they want to increase the after tax income for 2014 by $18, by how much do they have to increase their sales revenue

  How much vat does the retailer pay

What is the price that a consumer has to pay to buy the article? Find the input tax and output tax for the retailer. How much VAT does the retailer pay

  Calculate realised or unrealised exchange gains or losses

The invoice amount on 30 November 2020 is RM30,000 and remains unpaid. Calculate realised or unrealised exchange gains or losses

  How much gain must troy recognize on his home

Troy (single) purchased a home in Hopkinton, Massachusetts, on April 6, 2005, for $300,000. He sold the home on October 6, 2012, for $320,000.

  Confirm that the combination of twinkies and pizzas

Confirm that the combination of Twinkies and Pizzas you end up with will maximize your total utility by computing the total utility

  How much investment revenue should McKinley report for year

Ranier earns $350,000 and pays cash dividends of $140,000. How much investment revenue should McKinley report for the year

  Find the dollar value of cash provided

Use this information to find the dollar value of cash provided or (used) by operating activities. If the total is a use of cash, enter as a negative number

  What is tax due liability in first quarter return

What is her tax due liability in her 1st quarter return? Ms. Anna Frozen operates an ice cream store while she offers bookkeeping services

  What is the fair stock price of Monsters Inc

Monsters Inc. will pay its first annual dividend of $2 per share exactly 4 years from today, What is the fair stock price of Monsters Inc

  Profit margin ratio and gross profit rate

Compute the profit margin ratio and gross profit rate. Caltor Company's assets at the beginning of the year were $770,000 ,and were $830,000 at the end of the year. To qualify for full credit, you must state the formula you are using, show your co..

  What is the meaning of the inventory turnover ratio

What is the meaning of the inventory turnover ratio? How are these related to inventory? What about gross profit margin

  What amount should the building be initially recorded

At the time of acquisition the industrial building has a fair value of P35,000,000, on the existing use basis. At what amount should the building be initially

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd