MacDonald Oil Co

question 32

Multiple Choice

MacDonald Oil Co. expects sales of $1,000,000 and total variable costs of $600,000 for 2005. Total budgeted fixed costs are $200,000. What is the dollar amount of sales necessary to achieve pre-tax profits of $400,000?

• A)$2,000,000
• B)$1,200,000
• C)$1,500,000
• D)$1,000,000

Distinguish between call and put options and their strategic utilization in financial risk management.

Comprehend the impact of derivatives on a firm’s risk profile and the valuation implications.

Grasp the concept of basis risk and its relevance in the hedging process.

Understand cross-hedging and its application to manage risk in financial operations.

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Definitions:

Capillaries

The smallest blood vessels in the body's circulatory system, responsible for the exchange of oxygen, carbon dioxide, and other substances between blood and tissues.

Bowman Capsule

A double-layered structure surrounding the glomerulus of each nephron in the kidneys, involved in filtration of blood to form urine.

Urine Flow

The process of elimination of liquid waste from the body through the kidneys, ureters, bladder, and urethra.

Ureter

A pair of tubes that carry urine from the kidneys to the bladder in the urinary tract system.