Refer to Practice 19-3 and Practice 19-4. What would be the impact on the golf course developer’s total cash payment to purchase trees in Year 2 if the forward contract had been for just 3,000 trees rather than the full 10,000 trees expected to be purchased in Year 2? In other words, what would be the golf course developer’s total cash payment in Year 2 if it purchases 10,000 trees but the forward contract is for 3,000 trees and the January 1 of Year 2 tree price is (1) $300, (2) $850, and (3) $500? Comment on your computations.
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