Onshore and offshore :

Rated capacity = 120,000 panels

Europe :

D = 100,000 panels p = 70€

Demand up = 20% at 0.8

Demand down = 20% at 0.2

Plant range: 60k to 150k panels.

Chinese:

Plant range: 100 – 130k panels.

9 yuan/€

Yuan up = 10% 0.7

Yuan down = 10% 0.3

Calculate profit:

Demand increase per year = 20*0.8 – 20*0.2 = 12%

Yuan increase per year = 10*0.7 - 10*0.3 = 4%

Profit onshore (EU):

P(D= 100k, p = ,0)= 100,000*70€ - 1,000,000€ – 40€*100,000 = €2,000,000

P(D= 112k, p , 1) = 112,000*70€ - 1,000,000 – 40€*112,000 = €2,360,000

P(D= 125,440, p , 2) = 125,440*70€ -1,000,000 – 40€*125,440 = €2,763,200

NPV = 2,000,000 + 2,360,000/1.1 + 2,763,200/1.21 = €6,429,091

Profit offshore (China):

P(D= 100k , p ,0) = 100,000*70€ - 8,000,000/9 – (340/9)*100,000 = €2,333,333

P(D= 112k, p , 1) = 112,000*70€ - 8,000,000/8.64 – (340/8.64)*112,000 = €2,506,667

P(D= 125,440, p , 2) = 125,440*70€ - 8,000,000/8.2944 – (340/8.2944)*125,440 = €2,674,319

NPV = €2,333,333 + €2,506,667/1.1 + €2,674,319/1.21 = €6,822,302 ✓

Decision tree:
1)Eu:

P(D= 144, E= 10.89, 2)= 144,000*70 – 1,000,000 – 144,000*40 = €3,320,000

P(D= 96, E= , 2)= €1,880,000

P(D=64, E= , 2) = €920,000

For Node (D= 120, E= 9.9, 1)

EP= 0.8*0.3(€3,320,000) + 0.8*0.7(€3,320,000) + 0.2*0.3(€1,880,000) + 0.2*0.7(€1,880,000) = €3,032,000

PVEP = €3,032,000/1.1 = €2,756,364

P(D= 120, E= ,1) = 120,000*70 – 1,000,000 – 120,000*40 = €2,600,000

P+PVEP= €2,756,364 + €2,600,000 = €5,356,364

For Node (D= 120, E= 8.1, 1)

P+PVEP= €2,756,364 + €2,600,000 = €5,356,364

For Node (D= 80, E= 9.9, 1)

EP= 0.8*0.3(€1,880,000) + 0.8*0.7(€1,880,000) + 0.2*0.3(€920,000) + 0.2*0.7(€920,000) = €1,688,000

PVEP = €1,688,000/1.1 = €1,534,545

P= 80,000*70 – 1,000,000 – 80,000*40 = €1,400,000

P+PVEP= €1,400,000 + €1,534,545 = €2,934,545

For Node (D= 80, E= 8.1, 1)

P+PVEP= €1,400,000 + €1,534,545 = €2,934,545

For Node (D= 100, E= 9, 0)

EP =0.8*0.3(€5,356,364) + 0.8*0.7(€5,356,364) + 0.2*0.3(€2,934,545) + 0.2*0.7(€2,934,545) = €4,872,000

PVEP = €4,872,000/1.1 = €4,429,091

P = 100,000*70 – 1,000,000 – 100,000*40 = €2,000,000

P+PVEP = €2,000,000 + €4,429,091 = €6,429,091 

2)China:

Capacity between 130k - 100k

P(d= 144, E= 10.89 , 2) = 130,000*70 - ( 8,000,000+ 130,000* 340)/10.89= €4,306,612

P(D = 144, E= 8.91 , 2)= 130,000*70 - ( 8,000,000+ 130,000* 340)/ 8.91 = €3,241,414

P(D= 96, E= 10.89 ,2) = 96,000*70 - ( 8,000,000+ 100,000* 340)/10.89 = €2,863,250

P(D= 96, E= 8.91, 2) = 96,000*70 - ( 8,000,000+ 100,000* 340)/8.91 = €2,006,195

P(D= 144, = 8.91 , 2) = 130,000*70 - ( 8,000,000+ 130,000* 340)/8.91= €3,241,414

P(D= 144, E= 7.29, 2) = 130,000*70 - ( 8,000,000+ 130,000* 340)/ 7.29 = €1,939,506

P(D= 96, E= 8,91 , 2) = 96,000*70 - ( 8,000,000+ 100,000* 340)/8.91 = €2,006,195

P(D= 96, E= 7.29 , 2)= 96,000*70 - (8,000,000 + 100,000*340)/ 7.29 = €958,683

P(D= 96, E= 10.89 ,2) = 96,000*70 - ( 8,000,000+ 100,000* 340)/10.89 = €2,863,250

P(D= 96, E= 8.91, 2) = 96,000*70 - ( 8,000,000+ 100,000* 340)/8.91 = €2,006,195

P(D= 64, E= 10.89 ,2) = 64,000*70 – (8,000,000+100,000*340)/10.89 = €623,251

P(D= 64, E= 8.91,2) = 64,000*70 – (8,000,000+100,000*340)/8.91 = -233,805

P(D= 96, E= 8,91 , 2) = 96,000*70 - ( 8,000,000+ 100,000* 340)/8.91 = €2,006,195

P(D= 96, E= 7.29 , 2)= 96,000*70 - (8,000,000 + 100,000*340)/ 7.29 = €958,683

P(D= 64, E= 8.91,2) = 64,000*70 – (8,000,000+100,000*340)/8.91 = -233,805

P(D= 64, E= 7.29,2) = 64,000*70 – (8,000,000+100,000*340)/7.29 = -1,281,317

FOR NODE (D= 120 , E = 9.9 ,1)

EP = 0.8*0.3(€4,306,612) + 0.8*0.7 (€3,241,414) + 0.2*0.3 (€2,863,250) + 0.2*0.7 (€2,006,195) = €3,301,441

PVEP = €3,301,441/1.1 = €3,001,310

P(D=120 , E= 9.9, 1) = 120,000*70 – (8,000,000+ 120,000*340)/9.9= €3,470,707

P+PVEP = €3,001,310+ €3,470,707 = €6,472,017

= 4,301,354

= 3,007,859

= 1,164,757
FOR NODE (D= 100, E= 9 , 0)

EP= EP = 0.8*0.3(€6,472,017) + 0.8*0.7 (4,301,354) + 0.2*0.3 (3,007,859) + 0.2*0.7 (1,164,757) = €4,305,580

PVEP = €4,305,580/1.1 = €3,914,164

P(D= 100, E= 9 , 0) = 100,000*70 - (8,000,000 + 100,000 * 340)/9 = €2,333,333

PVEP + P = €3,914,164 + €2,333,333 = €6,247,497 LOWER THAN EU SO THEY SHOULD DO ONSHORE