P11-10 Hedging raw material price swings (LO 11-7 LO 11-8 ) The CFO at Brosnan, Inc, a book publisher, is concerned about the rising prices of paper and ink. She is considering the use of derivatives to lock in today's prices. Required: 1.One strategy used by Brosnan, Inc. is to buy pulp-paper futures on commodities exchanges. Paper prices can go up and down by more than 10% in a short period, when paper prices increase, Brosnan's operating profits fall. Explain how pulp-paper futures can be used to protect Brosnan's profits from harmful paper price increases 2. How will the pulp-paper futures affect profits if paper prices instead decline? . Ink prices tend to be even more volatile than paper prices but cannot be hedged by exchange-traded futures. So, the CFo asked an ink supplier to set up a forward contract for about half of the amount purchased each year. Explain how a forward contract can be used to protect Brosnan's profits from harmful ink price increases. . How will the forward contract affect profits if ink prices /reader 1xinstead declinea24e7749bfa9c59el