problem1. A wheat grower anticipates having 40,000 bushels of wheat to sell in 3 months. The wheat futures contract on the Chicago Board of Trade is 3,000 bushels of wheat.
a. How could the grower employ this contract for hedging?
b. What are the merits and demerits of hedging in this situation?
problem2. Great Forks hospital reported net income for 2012 of $2.4 million on total revenues of $30 million. Depreciation expense totalled $1 million.
a. What were total expenses for the year 2012?
b. What were total cash expenses for the year 2012? (Hint: Assume that all expenses, except depreciation, were cash expenses.)
c. What was the hospital's 2012 cash flow?