A bicycle manufacturer currently produces $333,000$ units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $ $2\mathrm{.}20$ a chain.

The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in$-$house production costs are estimated to be only $ $1\mathrm{.}60$ per chain.

The necessary machinery would cost $ $234,000$ and would be obsolete after $10$ years.

This investment could be depreciated to zero for tax purposes using a $10-$year straight$-$line depreciation schedule.

The plant manager estimates that the operation would require $ $42,000$ of inventory and other working capital upfront $($year $0),$ but argues that this sum can be ignored since it is recoverable at the end of the $10$ years.

Expected proceeds from scrapping the machinery after $10$ years are $ $17,550.$

If the company pays tax at a rate of $28\%$ and the opportunity cost of capital is $15\%,$ what is the net present value of the decision to produce the chains in$-$house instead of purchasing them from the supplier?

Project the annual free cash flows $($FCF$)$ of buying the chains.

The annual free cash flows for years $1$ to $10$ of buying the chains is $

$$

$($Round to the nearest dollar. Enter a free cash outflow as a negative number.$)$

Compute the NPV of buying the chains from the FCF$.$

The NPV of buying the chains from the FCF is $ $$

$($Round to the nearest dollar. Enter a negative NPV as a negative number.$)$

Compute the initial FCF of producing the chains.

The initial FCF of producing the chains is $

$($Round to the nearest dollar. Enter a free cash outflow as a negative number.$)$

Compute the FCF in years $1$ through $9$ of producing the chains.

The FCF in years $1$ through $9$ of producing the chains is $

$$

$($Round to the nearest dollar. Enter a free cash outflow as a negative number.$)$

Compute the FCF in year $10$ of producing the chains.

The FCF in year $10$ of producing the chains is $

$$

$($Round to the nearest dollar. Enter a free cash outflow as a negative number.$)$

Compute the NPV of producing the chains from the FCF$.$

The NPV of producing the chains from the FCF is $

$$

$($Round to the nearest dollar. Enter a negative NPV as a negative number.$)$

Compute the difference between the net present values found above.

The net present value of producing the chains in$-$house instead of purch. $($Round to the nearest$$ dollar.$)$