The price is $20, and the variable costs are $10 (local), $11 (hybrid), and 55 yuan/unit (China).

The yuan may strengthen by 5% means that the exchange rate increase by 5%. (eg. yuan strengthen by 5%: 6.5 * (1.05)=6.825)

Calculate down to four decimal points.

2. a) Select the local supplier:

	Year 2	Year 1
Profit before apply NPV
NPV of profits

b) Select the Chinses supplier:

	Year 2	Year 1
Profit before apply NPV
NPV of profits

Total NPV of the Chinses supplier case:

c) What is your recommendation?

3.

	Year 2	Year 1
Profit before apply NPV
NPV of profits

Total NPV of the hybrid case:

2. What do you think about the hybrid approach?