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Risk Management for Starbucks Coffee Bean Suppliers

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Suppose Starbucks consumers 100 million pounds of coffee beans per year. As the price off coffee rises, Starbucks expects to pass along 60% of the cost to its customers through higher prices per cup of coffee. To hedge its profits from fluctuations in coffee prices, Starbucks should lock in the price of how many pounds of coffee beans using supply contracts?

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The solution examines risk management for Starbucks coffee bean suppliers using supply contracts.

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