Question
This question is based on the case Central Express Trucking. I am trying to see if own answer and work is correct. Please read the
This question is based on the case "Central Express Trucking." I am trying to see if own answer and work is correct. Please read the 11 pictures I have posted before answering the question and please provide a detailed solution (with steps if needed). Thank you.
Question: Suppose that CTX buys a cap strike price of $3.90 to manage its exposure to fuel prices for the estimated fuel usage of 126,000 gallons. Calculate the profit and the average price paid per gallon for each of the following four scenarios:
Scenario A: Higher fuel usage combined with a high average fuel price. Specifically, 141,000 gallons of fuel used, average fuel price 4.20$/gallon, $1,456,000 revenue and other costs of $ 840,000
Scenario B: Lower fuel usage combined with a high average fuel price. Specifically, 111,000 gallons of fuel used, average fuel price 4.20$/gallon, $1,144,000 revenue and other costs of $ 660,000
Scenario C: Higher fuel usage combined with a low average fuel price. Specifically, 141,000 gallons of fuel used, average fuel price 3.30$/gallon, $1,456,000 revenue and other costs of $ 840,000
Scenario D: Lower fuel usage combined with a low average fuel price. Specifically, 111,000 gallons of fueel used, average fuel price 3.30$/gallon, $1,144,000 revenue and other costs of $ 660,000
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