You are the operations manager at your firm. Due to a pre-existing contract, you have the...

You are the operations manager at your firm. Due to a pre-existing contract, you have the opportunity to acquire 200 barrels of oil and 3000 pounds of copper for a total of $25,000. The current market price of oil is $90 per barrel and for copper is $3.50 per pound. You are not sure that you need all the oil and copper, so you are wondering whether you should take this opportunity. How much is the value of the opportunity? (enter your answer using a whole number, no "$", no comma. For example, 2300 for $2,300).

Would your decision change if you believed the value of oil or copper would plummet over the next month? (Think about his)

Solutions

Expert Solution

1. Opportunity Value

= Market Value - Contract Price

= (200*90)+(3000*3.5) - 25000

= 3500

2. Would your decision change if you believed the value of oil or copper would plummet over the next month

Yes, it will change. If the opportunity is negative value, then definitely decision will change.

jeff jeffy answered 2 years ago

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