4. Pucini's Risk-Sharing. Pucini Fashionwear, based in New York City, imports leather coats from Boselli 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 Pucini Fashionwear and Boselli Leather Goods 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/$ Pucini Fashionwear will pay based on the spot rate. If the exchange rate falls outside this range they will share the difference equally with Boselli Leather Goods. The risk-sharing agreement will last for six months, at which time the exchange rate lim- its will be reevaluated. Pucini Fashionwear contracts to import leather coats from Boselli Leather Goods. for Ps8,000,000 or $2,000,000 at the current spot rate of Ps4.0/$ during the next six months.

a. If the exchange rate changes immediately to Ps6.00/$ what will be the dollar cost of six months of imports to Pucini Fashionwear?

b. At Ps6.0/$ what will be the peso export sales of Boselli Leather Goods to Pucini Fashionwear?