Question

Cranked Coffee Company's cost of producing copper is about $3.95 per pound. The current market price for copper is $4.74 per pound. The six-month futures price for copper is $4.94 per pound. At this selling price, the company can maintain its earnings growth. The company expects to produce 1,250,000 pounds of copper in this six months. (Note: Copper futures are traded at a standard size of 250,000 pounds.) If the company does not hedge the copper it produces, it can expect to earn a total revenue of ______ at the end of six months.

	a.	$4,937,500
	b.	$0
	c.	$4,200,000
	d.	$5,925,000
	e.	$6,175,000

Answer 1