Question
9a. A fast food franchise located off an interstate highway exit in a rural area believes that its sales are affected by truck traffic, recreational
9a. A fast food franchise located off an interstate highway exit in a rural area believes that its sales are affected by truck traffic, recreational travel, and food prices. Explain how the company can empirically test whether these factors actually affect sales, including the information needed, the type of test performed, and the characteristics of a result that indicates that a factor actually has an effect.
b. Assume that the company has determined that one of those factors (your choice) does affect sales, identify one financial contract the company might use to hedge the risk associated with that factor. Be as specific as possible about the type of contract, the position the company should (given your assumption about the observed effect) and discuss briefly any cost required to hedge using the selected financial contract.
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