Who was the beneficiary of the risk sharing agreement

Reference no: EM131966079

Question: DeMagistris Fashion Company, based in New York City, imports leather coats from Acuña Leather Goods, a reliable and longtime supplier, based in Buenos Aires, Argentina. Payment is in Argentine pesos. When the peso lost its parity with the U.S. dollar in January 2002 it collapsed in value to Ps 4.0/$ by October 2002. The outlook was for a further decline in the peso's value. Since both DeMagistris and Acuña wanted to continue their longtime relationship they agreed on a risk-sharing arrangement. As long as the spot rate on the date of an invoice is between Ps3.5/$ and Ps4.5/$ DeMagistris will pay based on the spot rate. If the exchange rate falls outside this range they will share the difference equally with Acuña Leather Goods. The risk-sharing agreement will last for six months, at which time the exchange rate limits will be reevaluated. DeMagistris contracts to import leather coats from Acuña for Ps8,000,000 or $2,000,000 at the current spot rate of Ps4.0/$ during the next six months.

Assume the exchange rate is Ps4.00/$ and DeMagistras Fashion Company owes Ps8,000,000 to Acuna Leather.

a. What will be cost of the imports in dollars to DeMagistris?

b. What will be the pesos export sales price in pesos to Acuna?

c. Who was the beneficiary of this risk sharing agreement?

Reference no: EM131966079

Questions Cloud

Difference between limit load factors and factors of safety : Explain the difference between limit load factors and factors of safety. Determine the stiffness for a launch vehicle adapter

Determining the program internal documentation : List at least three types of information that should be included in a program's internal documentation (comments).

Discuss ethics and governance in explaining financial stress : Accounting Financial ACC701 - Discuss the ethics and governance in explaining the company's financial stress. Were liabilities a major factor contributing

What are the npvs and irrs for the best- and worst-case : Ignoring possible tax effects and rates, what is the appropriate discount rate to use in evaluating the proposed purchase? Why?

Who was the beneficiary of the risk sharing agreement : DeMagistris Fashion Company, based in New York City, imports leather coats from Acuña Leather Goods, a reliable and longtime supplier, based in Buenos Aires).

What is your opinion on trump budget : Congress has the Constitutional responsibility to pass a Budget. What is your opinion on Trump's budget? Would you adopt it or ignore it?

Prepare a flexible budget for rapid lab : Historical performance standards suggested that Test A should require 10 minutes of supervisory time and Test B should require 30 minutes of supervisory time.

Analyze conditions for optimal team performance : Analyze conditions for optimal team performance. Include two real world examples of what health care leaders can do to promote this.

How much money would be in the bank account : You are about to deposit $286 into one of the following savings accounts to be left on deposit for 25 years. Each bank offers an account with a different.

User Account

All Pages