Calculate the financial obligations and gain

Assignment Help Accounting Basics
Reference no: EM133185516

Question - Booster Oil Co. is expected to produce 50 million barrels of oil in June for sale at the indexed-based spot price. Its management however resolved later on to hedge 50% of its expected June production at a fixed price of $60.00 per barrel with Smooth Oils in a SWAP contract (which is their best choice under the over-the-counter transactions presently). Management being aware of the opportunity costs involved as well as the benefits to be accrued were keen on considering the following assumptions for due diligence.

i) Assuming the index price of oil is $90 per barrel at the time specified for valuation in the contract, calculate the financial obligations/gain and comment on the results.

ii) Assuming the index price of oil is $40.00 per barrel at the time specified for valuation in the contract, calculate the financial obligations/gain and comment on the results.

iii) Explain the opportunity costs involved as well as the benefits to be accrued that management considered given the scenario above.

Reference no: EM133185516

Questions Cloud

What is the average deduction percentage for that period : A hospital has $25 million in gross revenues and $12 million in net patient revenues. What is the average deduction percentage for that period
What amount should be shown in dina balance sheet : What amount should be shown in Dina's balance sheet on December 31, 2021, net of accumulated depreciation, for this machine
Given all this information, should you refinance : Suppose the new loan over the residual loan life requires a $200 non-refundable application fee. Given all this information, should you refinance
What is efa dividend per share : If the expected rate of return on its equity is 12% and a fair IPO price is $100 per share, what is EFA's dividend per share
Calculate the financial obligations and gain : Assuming the index price of oil is $90 per barrel at the time specified for valuation in the contract, calculate the financial obligations/gain
What is the breakeven point in dollars : Question - Assume a sales price per unit of $25, variable cost per unit $15, and total fixed costs of $15840. What is the breakeven point in dollars
What are the potential costs associated with delegated money : If money managers are unbiased, why wouldn't everyone invest indirectly? What are the potential costs associated with delegated money management
What is the optimal economic order quantity : A restaurant orders ribeye steaks for its inventory. What is the optimal economic order quantity for replenishing the inventory of ribeye steaks this year
What was the percentage decline : The NASDAQ stock market bubble peaked at 5,365 in 2000. Two and a half years later it had fallen to 1,310. What was the percentage decline

Reviews

Write a Review

Accounting Basics Questions & Answers

  What is the percentage tax

In operator of car with chauffeurs for hire had the following financial results of operations during the month: What is the percentage Tax

  Placing an advertisement within the local newspaper

Leila had lost her gold locket and chain. She had been highly distressed. Hence, she made an approach by placing an advertisement within the local newspaper. The advertisement stated that a reward of $ 50 will be given to the one who finds it.

  How much is the manufacturing overhead costs applied

Work in process inventory has increased by $10,000; How much is the manufacturing overhead costs applied to work in process during the year

  HI5020 Corporate Accounting Assignment

HI5020 Corporate Accounting Assignment Help and Solution - Holmes Institute, Australia - Assessment Writing Service - Accounting for Income Tax

  Analyze speeches by critiquing our own speeches

This week we are learning to study and analyze speeches by critiquing our own speeches and our peer's week two speeches. To help with that we'll delve more.

  Is a higher wacc good or bad

You are to determine the WACC for Chippenham Hospital. Provide a brief report in which you state your determination of WACC, describe and justify.

  Record the transactions in the desired manner

Instructions - Record the following transactions in the desired manner; as well, record the adjustments entry on December 31, 2019

  The may 1 work in process inventory consisted of 54000

the may 1 work in process inventory consisted of 54000 pounds with 50760 in materials cost and 27000 in conversion

  Write the appropriate audit report

Write the appropriate audit report, assuming you believe the departure from GAAP is material but not enough to cause you to give an adverse opinion.

  The balance per the bank statement was 8050 the balance per

the cooper group received their bank statement in the mail for the month ending january 31 2014.the balance per the

  Calculate food cost of sales and net food cost of sales

Dee's Steakhouse has separate food and bar operations. Calculate food cost of sales and net food cost of sales for August

  Greneer company had checks outstanding totaling 10800 on

greneer company had checks outstanding totaling 10800 on its june bank reconciliation. in july greneer company issued

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