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johnpaech johnpaech
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6 years ago
Another oil refiner is offering to trade you 10,150 Bbls of Alaska North Slope (ANS) crude oil for 10,000 Bbls of West Texas Intermediate (WTI) crude oil.  Assuming you currently have 10,000 Bbls of WTI crude, the added benefit (cost) to you if you take the trade is closest to:
A) ($1400)
B) $1400
C) ($3908)
D) $3908
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
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wrote...
#1
6 years ago
B
Explanation:  B) Total Benefits

No trade and refine WTI crude (base case)
10,000 Bbls × $77 of gasoline/Bbl = $770,000

Trade WTI for ANS crude
10,150 Bbls × $76 of gasoline/Bbl = $771,400

Added Benefits = Total Benefits - Base Case

Trade WTI for ANS crude
= $771,400 - $770,000 = $1400
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