The New York Pasta Company invested $8.5 million in a new plant in Mexico when the exchange rate was 8 pesos to the dollar. At the end of the year, the rate was 9.5 pesos to the dollar. What was the exchange rate gain or loss at year end? What kind of exchange rate gain or loss was it? What was the tax impact if New York's marginal tax rate is 40%?

Marginal Tax Rate

The rate at which the next dollar of taxable income would be taxed, often applied to measure the impact of taxes on additional income.

Exchange Rate

The velocity at which one currency can be swapped for another, affecting global trade and investments.

Tax Impact

The effect that various forms of taxation have on individual or company finances, including income, capital gains, and sales taxes.