Jason Stedman is the director of finance for Burton Manufacturing, a U.S.-based manufacturer of handheld computer systems for inventory management. Burton's system combines a low-cost active tag that is attached to inventory items (the tag emits an extremely low-grade radio frequency) with custom designed hardware and software that tracks the low-grade emissions for inventory control. Burton has completed the sale of an inventory management system to a British firm, Pegg Metropolitan (UK), for a total payment of 1,900,000.

The exchange rates shown as:

were available to Burton on the dates shown, corresponding to the events of this specific export sale. Assume each month is 30 days.

a. What will be the amount of foreign exchange gain (loss) upon settlement?

b. If Jason hedges the exposure with a forward contract, what will be the net foreign exchange gain (loss) on settlement?

c. If Jason hedges the exposure with a forward contract purchased on the date the contract is signed, what will be the net foreign exchange gain (loss) on settlement?

Spot Rate ($/f) Forward Rate ($/f) Days Forward Date Event 210 Price quotation for Pegg February 1 1.7756 1.7680 Contract signed for sale 1.7419 March 1 1.7332 180 1,900,000 Contract amount, pounds Product shipped to Pegg 1.7638 1.7554 90 June 1 1.7806 August 1 1.7773 30 Product received by Pegg 1.7188 September 1 Pegg makes payment Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet