of 100.000 Canadian dollars. The machine was shipped and payment was received on March 1, Year 2. On Septenber 1, Year I, Keefer Company purchased a put option giving it the right $75,000, Keefer Company properly designates the on March 1, Year 2, at a price of Canadian-dollar firm commitment. The option option as a fair value hedge of the $2.800 on December 31, Year 1. The fair value of $1,700 and had a fair value of through reference to changes in the spot rate. The follnwirm commitment is mancured pply: Kecter Company's incremental borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 pereent ( 1 pereent per month) is 0.9803 . 6. What was the net impact on Keefer Company's Year I income as a result of this fair value hedge of a firm commitment? a. $0. b. An $860.60 decrease in income. c. A$1,100.00 increase in income. d. A $1.960.60 increase in income. 7. What was the net impact on Keefer Company's Year 2 income as a result of this fair value hedge of a firm commitment? a. $0. b. An $839.40 decrease in incone. c. A$74,160.60 increase in income. d. A $76,200.00 increase in income. 8. What was the net increase or decrease in cash flow from having purchased the foreign currency option to hedge this exposure to foreign exchange risk? a. $0. b. A $1,000 increase in cash flow. c. A $1,700 decrease in cash flow. d. A $2,300 increase in cash flow. Use the following information for Problems 9 and 10: On November 1, Year 1, Black Lion Company forecasts the purchase of raw materials from an Argentinian supplier on February 1. Year 2. at a price of 200,000 Argentinian pesos. On November 1 , Year 1, Black Lion pays $1,200 for a three-month call option on 200,000 Argentinian pesos with a strike price of $0.35 per peso. The option is properly designated as a cash flow hedge of a forecasted foreign currency transaction. On December 31, Year 1, the optil