Acua Leather Goods.DeMagistris Fashion Company, based in New York City, imports leather coats from Acua 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

Ps4.0/$

by October 2002. The outlook was for a further decline in thepeso's value. Since both DeMagistris and Acua 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 Acua Leather Goods. Therisk-sharing agreement will last for six months, at which time the exchange rate limits will be reevaluated. DeMagistris contracts to import leather coats from Acua for

Ps8,500,000

or

$2,125,000

at the current spot rate of

Ps4.0/$

during the next six months.a. If the exchange rate changes immediately to

Ps7.0/$,

what will be the dollar cost of six months of imports to DeMagistris?b. At

Ps7.0/$,

what will be the peso export sales of Acua Leather Goods to DeMagistris Fashion Company?

a. If the exchange rate changes immediately to

Ps7.0/$,

what will be the dollar cost of six months of imports to DeMagistris?

$nothing

(Round to the nearest dollar.)