California Plastics uses crude oil as one of its major raw material inputs. The current price of

Question:

California Plastics uses crude oil as one of its major raw material inputs. The current price of crude oil is $35 per barrel. The company is concerned that significant increases in the price of crude oil could jeopardize its profits. Each $1 increase in the price of crude oil reduces the company’s earnings per share by about $0.02.How can California Plastics use futures contracts and/or options to protect itself against unfavorable price movements?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Contemporary Financial Management

ISBN: 9780324289114

10th Edition

Authors: James R Mcguigan, R Charles Moyer, William J Kretlow

Question Posted: