The Crazy Brook Meadow Ski Resort, hereafter CBM, is a small ski resort in Northern New England. CBM does not have snow making capability and depends, therefore, on Mother Nature to provide the snow for the ski season. The owner is worried that climate change may affect snow fall and the business may suffer under years where snow fall is low. CBM does not have enough cash reserves to go through a truly bad ski season. Average snow fall for the resort is approximately 220 inches a season. The average revenue for a ski season is approximately $30 million. The resort has a breakeven revenue need of $20 million. Your own personal prediction for snowfall for the 2021 ski season (fall/winter 2020 through winter/spring 2021) is 170 inches. The national weather service is predicting 190 inches.

An area (Northern New England) snowfall contract is available on a U.S. futures exchange. The contract settles at $500 times the snowfall in inches for the contract area, and trades in points (inches), with the minimum movement being 0.5 inches. The contract is currently at 190.

Do a statistical analysis (like a regression) on the data. At 190 inches how much revenue would you predict for CBM? At 170 inches how much revenue would you predict for CBM? Suppose you wanted to hedge against the National Weather Service prediction. How many contracts would you need (in round numbers) to hedge against a drop in snowfall?