What is its estimated year profit from now

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Question - ABC mines copper with fixed costs of $0.50/lb and variable cost of $0.40/lb. The 1-year forward price of copper is $1/lb. The 1-year continuously compounded interest rate is 6%.

If ABC does nothing to hedge copper price risk, what is its profit 1 year from now (per pound of copper)? If, on the other hand, ABC sells forward its expected copper production, what is its estimated 1-year profit from now? In both scenarios, assume the spot price of copper in 1 year can be $0.80, $0.90, $1.00, $1.10, and $1.20.

Reference no: EM132187714

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