The specialty chemical company operates a crude oil refinerylocated inNew IberiaLA.The company refines oil and sells theby-products to companies that make plastic bottles and jugs. Thefirm is currently planning for its refining needs for one yearhence. Specifically the firms analysts estimate that Specialtywill need to purchase 1 million barrels of crude oil at the end ofthe current year to provide the feed stock for the refining needsfor the coming year. The 1 million barrels of crude oil will beconverted into by-products at an average cost of $30 per barrelthat Specialty expects to sell for $170 million for $170 perbarrel of crude used. The current spot price of oil is $115 perbarrel and Specialty has been offered a forward contract by itsinvestment banker to purchase the needed oil for a delivery pricein one year of $120 per barrel.