A company wants to launch a new product and has the following two alternatives:

Alternative $1$: Outsource to an external vendor.

Alternative $2$: Start an in$-$house manufacturing unit.

The cash flows from the two alternatives are given below:

Year $0($Initial Investment$)$

Year $1$

Year $2$

Year $3$

Year $4$

Outsource to a vendor

$$60,000$

$$60,000$

$$60,000$

$$60,000$

Start an in$-$house unit

$-$$$200,000$

$$100,000$

$$100,000$

$$100,000$

$$100,000$

What will be the relevant cash flow for year $0$ and years $1$ to $3?$

Relevant free cash flow: year $0$: $-$$$40,000$; year $1$ to year $3$: $$40,000$

Relevant free cash flow: year $0$: $-$$$200,000$; year $1$ to year $3$: $$40,000$

Relevant free cash flow: year $0$: $-$$$200,00$; year $1$ to year $3$: $$100,000$

Relevant free cash flow: year $0$: $0$; year $1$ to year $3$: $$60,000$