A Midwest spare parts distributor has production facilities in Ohio and China to serve the USA market. Both the Ohio and the China facility have a fixed capacity of 110,000 units each per year. The cost of production and distribution of spare parts from Ohio is $10/unit. The cost of production and distribution of spare parts from China is 70 Yuan/unit. (Current exchange rate is $1=9 Yuan). Over the next two years the exchange rate is expected to strengthen by 5% with a 0.5 probability and weaken by 5% with a probability of 0.5. The expected demand in the US this year is about 200,000 units. Over the next three years the demand is expected to increase by 10% with a probability of 0.5 and decrease by 5% with a probability of 0.5. If demand is more than the capacity of the two plants then the remaining spare parts are acquired from a competitor for $12/unit. What is the NPV of total cost with the current manufacturing setup? The company wants to increase the capacity of the China plant by 20,000 units at a fixed cost of $130,000. The fixed cost will be incurred this year. What is the NPV of the revised setup? Should They do it? Assume that the company uses a 10% discount rate.