EBK CORPORATE FINANCE
4th Edition
ISBN: 9780134202785
Author: DeMarzo
Publisher: VST
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Textbook Question
Chapter 30, Problem 5P
BHP Billiton is the world’s largest mining firm. BHP expects to produce 2 billion pounds of copper next year, with a product ion cost of $0.90 per pound.
- a. What will be BHP's operating profit from copper next year if the price of copper is $1.25, $1.50, or $1.75 per pound, and the firm plans to sell all of its copper next year at the going price?
- b. What will be BHP’s operating profit from copper next year if the firm enters into a contract to supply copper to end users at an average price of $1.45 per pound?
- c. What will be BHP’s operating profit from copper next year if copper prices are described as in part (a), and the firm enters into supply contracts as in part (b) for only 50% of its total output?
- d. Describe situations for which each of the strategies in parts (a), (b), and (c) might be optimal.
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BHP Billiton is the world's largest mining firm. BHP expects to produce 1.50 billion pounds of copper next year, with a
production cost of $0.75 per pound.
a. What will be BHP's operating profit from copper next year if the price of copper is $1.25, $1.55, or $1.85 per pound,
and the firm plans to sell all of its copper next year at the going price?
b. What will be BHP's operating profit from copper next year if the firm enters into a contract to supply copper to end
users at an average price of $1.50 per pound?
c. What will be BHP's operating profit from copper next year if copper prices are described as in part (a), and the firm
enters into supply contracts as in part (b) for only 50% of its total output?
d. For each of the situations below, indicate which of the strategies (a), (b), or (c) might be optimal.
a. What will be BHP's operating profit from copper next year if the price of copper is $1.25, $1.55, or $1.85 per pound,
and the firm plans to sell all of its copper next year at…
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Chapter 30 Solutions
EBK CORPORATE FINANCE
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Ch. 30 - Prob. 3PCh. 30 - Your firm faces a 9% chance of a potential loss of...Ch. 30 - BHP Billiton is the worlds largest mining firm....Ch. 30 - Prob. 6PCh. 30 - Prob. 7PCh. 30 - Prob. 9PCh. 30 - Prob. 10PCh. 30 - Prob. 11PCh. 30 - You have been hired as a risk manager for Acorn...Ch. 30 - Prob. 13PCh. 30 - Prob. 14P
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