How would husky reflect the change in value

Reference no: EM132213371

Question: On November 1, 2017 Husky owned 1,000,000 barrels of oil that it wants to sell in March 2018 for $72 per barrel. Husky acquired the oil for $65 per barrel in September from a local competitor that was going out of business. Husky management would like to hedge against a change in the price of oil so they can remove the risk that future cash flows will be different from the $72,000,000 expected amount. On November 1,2017 the company enters into a forward contract to sell 1,000,000 barrels of oil in March 2018 for a price of $72 per barrel (the right and obligation to deliver). Assume the forward contract has no value at inception. The company's managers designate this as a cash flow hedge, and it is expected to be highly effective.

(a) Assume that on December 31, 2017 the forward price for March 2018 delivery of oil has increased to $73.50 per barrel. Since Husky is a calendar year-end firm, how would Husky reflect the change in value of the forward contract in their financial statements?

Reference no: EM132213371

Questions Cloud

Display the list of positional parameter : Set the positional parameters to be the output of the date.Display the list of positional parameter.

Write a segment of code that reads a sequence of integers : Write a segment of code that reads a sequence of integers from the keyboard until the user enters a negative number.

What is the ethical dilemma conflict presented in scenario : BUGEN 5930 Federation University, Australia. Develop a fictional scenario that outlines the emergence of an ethical dilemma in a workplace of your choosing

Which of the four options should be chosen : The ABC Storage Company provides warehouse facilities mainly for household goods moving companies. Up until now, ABC has fully retained all theft and burglary.

How would husky reflect the change in value : Assume that on December 31, 2017 the forward price for March 2018 delivery of oil has increased to $73.50 per barrel. Since Husky is a calendar year-end firm.

Write a script in r that computes the probability : Write a script in R that computes the probability that two or more students have a same birthday for either of the following cases.

How much equity do you need to purchase the property : Assume for the purposes of this question that the price you are paying for this property is the value that you calculated using your assumed cap rate.

Compute the sum of the items in the list using attributes : Write sematic rules for each production that compute the sum of the items in the list using attributes grammar.

Describe underwriter profits from the overallotment option : Explain what will happen if the price of the stock increases to $22. Describe the underwriter profits from the overallotment option in your explanation.

User Account

All Pages