Diwali Airlines has a contract that gives it the opportunity to purchase up to 10 000 000 gallons of jet fuel at $2.00 per gallon. The current market price of jet fuel is $2.26 per gallon. Diwali believes it will only need 6 000 000 gallons of jet fuel. What is the value of this opportunity?
A)$9 040 000
B)$2 600 000
C)$1 040 000
D)$1 560 000

Question

Quizplus · Accepted Answer

The value of the opportunity is the difference between the market price and the contract price, multiplied by the amount Diwali plans to purchase: (2.26 - 2.00) * 6,000,000 = $1,560,000.

Diwali Airlines Has a Contract That Gives It the Opportunity