Question

Heinz uses 1000 tons of corn syrup each year as an ingredient in its tomato ketchup products. Heinz is concened about the increase in prices of corn-based products and purchases a fixed-price contract to buy corn syrup at $20,000 per ton. What is the impact on earnings before taxes as opposed to no hedging if the price of corn is $25,000 per ton over the next year? O A. +$5,000 B. $5 million c. +$5 milion OD. SO ○E, -$5,000

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solution: 25000 Actual price per ton Less: contract price per ton-20000 Profit per ton x number of tons Increase in profit 50

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