BHP Billiton is the world's largest mining firm. BHP expects to produce 1.50 billion pounds of copper next year, with a production cost of $0.75 per pound. a. What will be BHP's operating profit from copper next year if the price of copper is $1.25, $1.55, or $1.85 per pound, and the firm plans to sell all of its copper next year at the going price? b. What will be BHP's operating profit from copper next year if the firm enters into a contract to supply copper to end users at an average price of $1.50 per pound? c. What will be BHP's operating profit from copper next year if copper prices are described as in part (a), and the firm enters into supply contracts as in part (b) for only 50% of its total output?
BHP Billiton is the world's largest mining firm. BHP expects to produce 1.50 billion pounds of copper next year, with a production cost of $0.75 per pound. a. What will be BHP's operating profit from copper next year if the price of copper is $1.25, $1.55, or $1.85 per pound, and the firm plans to sell all of its copper next year at the going price? b. What will be BHP's operating profit from copper next year if the firm enters into a contract to supply copper to end users at an average price of $1.50 per pound? c. What will be BHP's operating profit from copper next year if copper prices are described as in part (a), and the firm enters into supply contracts as in part (b) for only 50% of its total output?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:BHP Billiton is the world's largest mining firm. BHP expects to produce 1.50 billion pounds of copper next year, with a
production cost of $0.75 per pound.
a. What will be BHP's operating profit from copper next year if the price of copper is $1.25, $1.55, or $1.85 per pound,
and the firm plans to sell all of its copper next year at the going price?
b. What will be BHP's operating profit from copper next year if the firm enters into a contract to supply copper to end
users at an average price of $1.50 per pound?
c. What will be BHP's operating profit from copper next year if copper prices are described as in part (a), and the firm
enters into supply contracts as in part (b) for only 50% of its total output?
d. For each of the situations below, indicate which of the strategies (a), (b), or (c) might be optimal.
a. What will be BHP's operating profit from copper next year if the price of copper is $1.25, $1.55, or $1.85 per pound,
and the firm plans to sell all of its copper next year at the going price?
The operating profit when the price per pound is $1.25 will be $ ☐ billion. (Round to two decimal places.)
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