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DKNY owes Euro 170 million in 60 days for a recent shipment of Spanish textiles. It faces the following exchange rates: Spot rate: Euro 0.89/$

DKNY owes Euro 170 million in 60 days for a recent shipment of Spanish textiles. It faces the following exchange rates:

Spot rate: Euro 0.89/$

Forward rate (60 days) Euro 0.91/$

Forward rate (60 days) Euro 0.93/$

Instead of a traditional hedge, DKNY and the Spanish exporter agree to share the currency risks. Suppose in a price adjustment clause, the neutral zone is specified as a band of exchange rates: Euro 0.87/$ - Euro0.93/$ with a base rate of Euro 0.90/$. The exchange rate movement beyond the boundary of the neutral zone will be shared equally by two companies. If Euro depreciates to Euro 0.97/$, what is the actual dollar payment by DKNY?

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