Consider two manufacturers of steel pipes, Company A and B. Since they are in the...
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Consider two manufacturers of steel pipes, Company A and B. Since they are in the same industry they are competitors. However, Company A is expecting an increase in steel prices in the coming months, and has decided to use futures contracts to hedge its purchase of steel over the next 12 months. But Company B has decided not to hedge. Now if the price of steel really goes down rather than going up, which of the following might happen? [4 marks] Select one: O a. Company A's profit margin will decrease after the effects of the hedge have been taken into account. o b. Company A's gross profit margin will be unaffected. O C. None of the companies will be affected. o d. Company A's profit margin will increase after the effects of the hedge have been taken into account. o e. Company B's gross profit margin will be unaffected
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