a bicycle manufacturer 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 $2.10 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Idrect in-house production costs are estmated to be only $1.50 per chain. The ncessary machinery would cist $224,000 and would be obsolete after ten years. The investment would require additional working capital of $35,000 but argues that this sum can be ignored since it is recoverable at the end of ten years. Expected proceeds from scrapping the machinery after ten years are $16,800. if the company pays tax at a rate of 35% 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 cassh flow as a negative number)

Compute the NVP of buying the chains from the FCF

The NVP of buying the chains from the FCH is $_________ (round to the nearest dollar. Enter the NVP 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 though 9 producing the chains.

The FCF in years 1 though 9 of producing the chains is $________ (round to the nearest dollar, enter as a negative number)

Compute the FCF in year 10 of producing the chains.

The FCF in year 10 or producing the chains is $____________ (round to the nearest dollar, enter as a negative number)

Compute the NPV or producing the chains from the FCF.

The NVP of producing the chains from the FCF is $_______ (round to the nearest dollar, enter as a negative number)

Compute the difference between the net present value found above

The net present value of producing the chains in house instead of purchasing them from the supplier is $_______ (round to the nearest dollar)