Carrington Industries sold equipment to a Mexican firm. Payment of 41,275,000 pesos will be due in 30 days. Carrington has the option of selling the pesos at a 30-day forward rate of $0.09739/peso. If it waits 30 days to sell the pesos, the expected spot rate is $0.09596/peso. How much additional dollar revenue will Carrington gain by selling forward the pesos? (Round your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

To determine the additional dollar revenue gained by selling forward the pesos, we first need to calculate how much Carrington would receive in dollars if they didn't sell forward and instead waited 30 days to convert the pesos to dollars at the expected spot rate.

41,275,000 pesos / 0.09596 dollars per peso = $429,963.24

Now, we need to calculate how much Carrington would receive in dollars if they sell forward the pesos at the 30-day forward rate of $0.09739 per peso:

41,275,000 pesos x $0.09739 per peso = $4,016,182.25

Therefore, Carrington would receive an additional $4,016,182.25 - $429,963.24 = $3,586,218.01 by selling forward the pesos.

Rounding to the nearest dollar, the answer is $59,023.

Carrington Industries Sold Equipment to a Mexican Firm