Refer to Problem 13 regarding Eastmark Electrical Equipment Manufacturers. Suppose the futures contact is still in force in February.
a. However, assume the firm has just lost a key client's business and only purchases 400,000 pounds of copper.
i. Calculate the one month financial and the physical results if the market price of copper has risen to $4.50 per pound. Calculate only the financial impact of copper transactions and disregard the loss of revenue due to business loss.
ii. Calculate the one month financial and the physical results if the market price of copper has fallen to $3.00 per pound. Calculate only the financial impact of copper transactions and disregard the loss of revenue due to business loss.
b. Now assume the firm has just received a new client's business and must purchase 800,000 pounds of copper.
i. Calculate the one month financial and the physical results if the market price of copper has risen to $4.50 per pound. Calculate only the financial impact of copper transactions and disregard the loss of revenue due to business loss.
ii. Calculate the one month financial and the physical results if the market price of copper has fallen to $3.00 per pound. Calculate only the financial impact of copper transactions and disregard the loss of revenue due to business loss.