Georgia Company, a US firm, imports from a firm from Argentina. Payment is in Argentine pesos. Current
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Georgia Company, a US firm, imports from a firm from Argentina. Payment is in Argentine pesos. Current spot rate is Ps 4.5/$. The outlook was for a further decline in the peso's value. Both parties agree that as long as the spot rate on the date of an invoice is between Ps4.0/$ and Ps7.0/$, the US importer will pay based on the spot rate. If the exchange rate falls outside this range they will share the difference equally with. The US firm contracts to import from Argentinian firm for Ps13,000,000 or $3,000,000 at the current spot rate of Ps4.50/$.
If the exchange rate changes immediately to Ps6.00/$, what will be the dollar cost of imports?
Related Book For
Multinational Business Finance
ISBN: 978-0133879872
14th edition
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
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