Describe how fuel surcharges work

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The purpose of this question is to evaluate the magnitude of the fuel price risk exposure for CTX in the absence of any hedging. Calculate the profit of the Svensen proposal for each the following eight fuel price outcomes: 3.40, 3.50, 3.60, 3.70, 3.80, 3.90, 4.00, 4.10, Find the fuel price that makes the profit zero.

Describe how fuel surcharges work. Explain the advantages and disadvantages of fuel surcharges as a risk mitigation strategy. Answer this question using information from the case.

Calculate the profit of the Svensen proposal assuming that CTX hedges all the fuel costs using the swap contract offered by Woodside. Note that CTX would transact at the ask price.

Reference no: EM133075919

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