Blowfast Corporation, a U.S. exporter, sold wind turbines to a Mexican customer at a price of 5,000,000 U.S. dollars. In order to close the sale, however, Blowfast needed to agree to make its invoice payable in Mexican pesos, thus agreeing to take on the exchange rate risk for the transaction. The USDMXN exchange rate on the day of the sale was 20.0000, making the cost to the customer (per the invoice) 100,000,000 pesos. The terms of payment were: net, 6 months. If the value of the peso fell against the U.S. dollar such that one dollar would buy 22.0000 pesos by the date the invoice needed to be paid, what dollar amount would Blowfast receive assuming that it exchanged the recently received pesos for U.S. dollars in a foreign exchange transaction on the payment date? How much money did Blowfast gain or lose because of the change in the exchange rate?
Blowfast Corporation, a U.S. exporter, sold wind turbines to a Mexican customer at a price of 5,000,000 U.S. dollars. In order to close the sale, however, Blowfast needed to agree to make its invoice payable in Mexican pesos, thus agreeing to take on the exchange rate risk for the transaction. The USDMXN exchange rate on the day of the sale was 20.0000, making the cost to the customer (per the invoice) 100,000,000 pesos. The terms of payment were: net, 6 months. If the value of the peso fell against the U.S. dollar such that one dollar would buy 22.0000 pesos by the date the invoice needed to be paid, what dollar amount would Blowfast receive assuming that it exchanged the recently received pesos for U.S. dollars in a foreign exchange transaction on the payment date? How much money did Blowfast gain or lose because of the change in the exchange rate?
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