S Agrees to Sell B 10,000 Widgets at a Price

question 30

Multiple Choice

S agrees to sell B 10,000 widgets at a price of $1 per widget.After B breaches the contract,S resells the widgets for $0.90 per widget.As a result of selling the widgets at a lower price,S loses $100 in sales commissions.S saved $200 in shipping costs as the new customer was located closer to its factory.What amount can S recover from B?

• A)$900
• B)$100
• C)$1,100
• D)$1,000

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Definitions:

Firm Value

The total value of a business, including its equity and debt components, considered in the context of valuation or acquisition.

Hedge

A financial strategy used to reduce or offset the risk of adverse price movements in an asset.

Price Risk

The risk of a change in the market price of securities affecting an investor's portfolio value.

Bushels

A unit of volume that is used in the United States for measuring agricultural commodities, such as grains.