The Candy Town Company, a competitor of the SweetTooth CandyCompany, knows it will need 40,000 lbs of sugar six months from nowto implement its production plans. James Taffy, Candy Town'spurchasing manager, has essentially two options for acquiring theneeded sugar. One option is to buy the sugar at the going marketprice when they need it, six months from now. Mr. Taffy hasassessed the probability distribution for the possible prices ofsugar six months from now (in dollars per pound) as shownbelow:

Price in 6-month   Probability

   $0.078           0.10
     0.086    0.20
     0.094    0.20
     0.102    0.20
     0.110    0.20
     0.118    0.10   

The second purchasing option is to buy a futures contract now.The contract guarantees delivery of the sugar in six months but thecost of purchasing it will be based on today's market price. Assumethat possible sugar futures contracts available for purchase arefor 10,000 lbs, 20,000 lbs or 40,000 lbs only. No futures contractscan be purchased or sold in the intervening months. The Candy TownCompany will buy the total of 40,000 lbs of sugar in one way oranother. The price of sugar now is $0.0851 per pound. Thetransaction costs for 10,000 lbs, 20,000 lbs and 40,000 lbs futurescontracts are $150, $200, and $350, respectively.

(You may choose one answer more than once.)

Question 1 options:

123456789 The EMV of buying the 10,000 lbs futures contract is 123456789 If the current sugar price per pound is $0.092, the bestdecision alternative by the EMV method is 123456789 The best decision alternative by the Maximin method is 123456789 The best decision alternative by the EMV method is 123456789 The EMV of buying the 40,000 lbs futures contract is 123456789 The best decision alternative by the Maximax method is 123456789 The EMV of not buying a futures contract is The EMV of not buying a futures contract is 123456789 The EMV of buying the 20,000 lbs futures contract is

1. 3683 2. 3754 3. 3862 4. 3920 5. 3941 6. Buy no futures contract 7. Buy the 10,000 lbs futures contract 8. Buy the 20,000 lbs futures contract 9. Buy the 40,000 lbs futures contract