Use the Following Information to Answer the Question(s)below

question 36

Multiple Choice

Use the following information to answer the question(s) below.
d'Anconia Copper expects to produce 500 million pounds of copper next year,with production costs of $0.75 per pound.Depending upon the economic conditions over the next year,d'Anconia Copper expects the price of copper next year to be either $1.40,$1.50,or $1.60 per pound,with each outcome being equally likely.d'Anconia Copper expects to sell all of its copper at the going price.
-If d'Anconia Copper enters into a contract to supply copper to end users at an average price of $1.48 per pound,then d'Anconia Copper's operating profit next year will be closest to:

• A)$325 million.
• B)$365 million.
• C)$375 million.
• D)$425 million.

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Definitions:

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and subsequently adjusted to reflect the investor's share of the investee's profits or losses.

Investment Accounts

Accounts held at a financial institution that hold investments such as stocks, bonds, mutual funds, and ETFs, often for purposes of earning a return.

Trading Debt Securities

Securities bought and held primarily for sale in the near term to generate income on short-term price differences.

Fair Value

The estimated price at which an asset or liability could be traded in a fair transaction between willing parties.