16. Maria Gonzalez and Trident (B). One year later Maria Gonzalez is still on the job at Trident. Trident's business is booming, and sales have now expanded to include exports to Germany and Japan, besides con- tinuing sales to the United Kingdom. All export sales are invoiced in the local currency of the buyer. Maria Gonzalez will book the following sales this period:

Maria Gonzalez has collected the following spot rates (sales will be booked at these rates), 90-day for- ward rates, and 90-day forecasts by Trident's foreign exchange adviser for the three currencies:

Creating a pro forma income statement for Trident, answer the following questions:

a. If Maria Gonzalez leaves all positions uncovered, and the final spot rates at settlement are exactly what the FX adviser had forecast, what are the foreign exchange gains (losses) for the period, and what is the final net income and earnings per share (EPS) figures?

b. If Maria Gonzalez covers all positions with full forward cover, and the final spot rates at settle- ment are exactly what the FX adviser forecast, what are the foreign exchange gains (losses) for the period, and the final net income and earnings per share (EPS) figures?

c. If Maria Gonzalez uses a common industry prac- tice of covering all positions 100% with forward cover if the forward rate earns her the points, while only covering half the positions in which she is paying the forward points, what are the for- eign exchange gains (losses) for the period and the final net income and earnings per share (EPS) figures, assuming the following final settlement spot rates: $1.0480/E, $1.6000/, 122.50/$?

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Domestic sales $7,300,000 (45-day credit terms) Export sales 2,340,000: 1,780,000 125,000,000 (all export terms are 90 days) Other income statement items are as follows: Cost of goods sold G&A expenses Depreciation US corporate tax Shares outstanding 65% of sales 9% of sales $248,750 per period 40% of earnings before tax 1,000,000