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Price fluctuations in commodities can have significant consequences for companies, especially if the fluctuation involves a prime raw material for a company. Different companies will adopt different strategies to manage the risk in price fluctuations, including adjusting the timing of their commodity purchases, maintaining a safety stock of their raw materials, and hedging. Consider the case of Green Catepillar Garden Supplies Inc., a large copper-producing company: The company's cost of producing copper is about $3.60 per pound. The current market price for copper is $4.32 per pound. The six-month futures price for copper is $4.50 per pound. At this selling price, the company can maintain its earnings growth. The company expects to produce 500,000 pounds of copper in this six months. (Note: Copper futures are traded at a standard size of 250,000 pounds.) If the company does not hedge the copper it produces, it can expect to earn a total revenue of at the end of six months. If Green Catepillar places a hedge on its copper production in the futures market, it would contracts for delivery in six months at a delivery price of $4.50 per pound to generate profits that maintain its desired earnings growth. When the contract comes due in six months, the spot price of copper is $3.06 per pound in the cash markets. Prices on the new six-month futures contracts in copper are $3.83 per pound. Calculate the expected revenue in the following markets: Futures Market Net gain or loss in the futures market: O $720,000 O $1,915,000 O -$2,250,000 O -$270,000Cash Market Net gain or loss in the cash market: 0 -$270,000 0 $180,000 0 $1,915,000 0 $335,000 The cost of production of copper is $1,800,000. Thus, Green Catepillar will v in the futures market and V in the cash market. This gain and loss offset each other, and the company benefits from placing the hedge. This hedging strategy would be referred to as a V hedge, and it helps protect the producer to sell a commodity against falling prices