Heinz uses 2000 tons of corn syrup each year as an ingredient in its tomato ketchup products.Heinz is concerned about the increase in prices of corn-based products and purchases a fixed-price contract to buy corn syrup at $20,000 per ton.What is the impact on earnings before taxes as opposed to no hedging if the price of corn is $15,000 per ton over the next year?
A)+$5 million
B)-$10 million
C)$0
D)+$10 million
E)-$5 million

Question

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The Answer of Heinz uses 2000 tons of corn syrup each year as an ingredient in its tomato ketchup products.Heinz is concerned about the increase in prices of corn-based products and purchases a fixed-price contract to buy corn syrup at $20,000 per ton.What is the impact on earnings before taxes as opposed to no hedging if the price of corn is $15,000 per ton over the next year?
A)+$5 million
B)-$10 million
C)$0
D)+$10 million
E)-$5 million

Heinz Uses 2000 Tons of Corn Syrup Each Year as an Ingredient