Preheat oven to 325°F. Spread coconut in an even layer on baking sheet. Toast in the oven for 5 minutes or until golden brown. Set aside to cool.
In a large mixing bowl, combine milk and sugar. Whisk until sugar is dissolved — this should take 2-3 minutes. Add cream, coconut extract, vanilla extract and whisk until combined.
Follow ice cream machine’s directions and add toasted coconut in the last 5 minutes of churning (if you have the same one as I do, I churned for 25 minutes, added the coconut and continued to churn for 5 more minutes).
Pour into a shallow container (I used a loaf pan) and drizzle in hot fudge. Use a knife to swirl the hot fudge around. Freeze until solid, or 3-4 hours.