A company that manufactures copper piping is offering to trade you 5,925 tons of low-grade copper ore for 4,000 tons of high-grade copper ore
Assuming you currently have 4,000 tons of high-grade ore, what are the total benefits and added benefits of taking the trade?
Answer: Total Benefits
No trade and refine high-grade ore (base case): 4,000 tons × $940 of copper/ton = $3,760,000
Trade high-grade for low-grade: 5,925 tons × $640 of copper/ton = $3,792,000 (total benefits)
Added Benefits = Total Benefits - Base Case = $3,792,000 - $3,760,000 = $32,000
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