A farmer wants to sell future harvest of wheat at the current rate of Rs.18, but he fears that the wheat prices might fall in the next 3 months. In this case, he enters a contract with a grocery store for selling them 1000kgs of wheat at Rs.18 in 3 months. Draw the pay-off chart for the farmer.
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A farmer wants to sell future harvest of wheat at the current rate of Rs.18, but he fears that the wheat prices might fall in the next 3 months. In this case, he enters a contract with a grocery store for selling them 1000kgs of wheat at Rs.18 in 3 months. Draw the pay-off chart for the farmer.
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- Now assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.Assume that in March a farmer and a baker enter into a forward contract on 100,000 bushels of wheat at a price of $5 per bushel for delivery in September. In September the spot price of wheat is $5.2 per bushel. Who has profited from entering into the forward contract, by how much?Explain who will be at profit and who will lost based on the situation belowand show the calculation. Given that in May a farmer and a baker enter into a forward contract on a thousand bushels of wheat at a price of $5.00 per bushel for delivery in December. In December the spot price of wheat is $4.00 per bushel.
- Assume that a customer shops at a local grocery store spending an average of $350 a week, resulting in a retailer profit of $30 each week from this customer. Assuming the shopper visits the store all 52 weeks of the year, calculate the customer lifetime value if this shopper remains loyal over a 10-year life span. Also, assume a 6 percent annual interest rate and no initial cost to acquire the customer. How much does the customer yield per year in profits for this retailer? (Round to the nearest dollar.)Wall’s Pharmacy will have to sell a new product that has an estimated revenue of $5,100 per month and costs of $1,000 per month with an initial purchase of $28,000. How long will Wall's Pharmacy have to sell a new product if the MARR is 0% per month? Wall's Pharmacy will have to sell a new product for __ months.A large agribusiness firm has contracted to deliver 100,000 bushels of wheat for $8.50 a bushel at the end of October. On the delivery date, the spot price of wheat is $8.70 per bushel. Which of the following is true? a. the buyer of the contract has a 20,000 loss b. the buyer of the contract has a 20,000 profit c. the seller of the contract has 20,000 profit
- In a certain department store, the monthly salary of a saleslady is partly constant and partly varies with her sales for the month. When the value of her sales for the month is P10,000, her salary for the month is P900. When her salary for the month goes up to P12,000, her monthly salary becomes P1,000. What must be the value of her sales for the month so that her salary for the month will be P2,000? Draw the cash flow diagramwith your solution.It is September 10 and Mr. James is making final estimates of this year’s wheat crop. His production is turning out to be much better than anticipated. This causes concern because if his production is better than expected, other farmers must be experiencing the same situation. The current spot price is $2.25 per bushel, and the October wheat futures (5,000 bushels per contract) price is $2.52 per bushel. At the current spot price, Mr James would just break even with his anticipated 60,000 bushels. His wheat will not be ready until October. a) At harvest time in October, Mr James’ concerns are realized in that the cash price has dropped to $1.70 per bushel. Compute Mr James’ payoff on wheat futures, assuming he hedged his anticipated production and his final yield was 60,000 bushels.It is September 10 and Mr. James is making final estimates of this year’s wheat crop. His production is turning out to be much better than anticipated. This causes concern because if his production is better than expected, other farmers must be experiencing the same situation. The current spot price is $2.25 per bushel, and the October wheat futures (5,000 bushels per contract) price is $2.52 per bushel. At the current spot price, Mr James would just break even with his anticipated 60,000 bushels. His wheat will not be ready until October. a) What is the essential feature of a forward contract that makes a futures contract a type of forward contract?
- It is September 10 and Mr. James is making final estimates of this year’s wheat crop. His production is turning out to be much better than anticipated. This causes concern because if his production is better than expected, other farmers must be experiencing the same situation. The current spot price is $2.25 per bushel, and the October wheat futures (5,000 bushels per contract) price is $2.52 per bushel. At the current spot price, Mr James would just break even with his anticipated 60,000 bushels. His wheat will not be ready until October.a) What can Mr James do to ensure his profitability? Is this a long or a short hedge? Why? b) At harvest time in October, Mr James’ concerns are realized in that the cash price has dropped to $1.70 per bushel. Compute Mr James’ payoff on wheat futures, assuming he hedged his anticipated production and his final yield was 60,000 bushels.c) Suppose Mr James’ production turned out to be only 50,000 bushels. Compute his net revenue and compare it with…Every month Fritz buys 100 novelty plungers from Eddie at $20 each. He then sells all of the plungers, and at the end of the month deposits all but $2, 000 (to buy the next month’s plungers) in an account earning i^12 = 5%. The first month, he sells the plungers for $40, but because of the competitive novelty plunger market, Fritz must lower his prices by $1.50 every month. After many months, he realizes that his prices are low enough that if he lowered his prices again, he would not make a profit. At the end of that month, he deposits all but $2,000 of his proceeds into the account and gets out of the novelty plunger business. How much is in his account immediately after the final deposit (in dollars)? Group of answer choices 9617 10835 14891 13446The Home Depot is clearing out lawn mowers for $399.75 in an end-of-season sale that ends on September 30. Alternatively, you could wait until April 1 (assume February is in a non–leap year) and pay $419.95 on the same lawn mower. Assume your money can earn simple interest of 4.72% on a short-term investment.a. Which option should you choose?b. How much money will you have saved on September 30 by making that choice?