Task: Your company plans to outsource the printing and copying function. You have been asked to evaluate this proposal. You have gathered the following information.
1. Current printing and coping costs within the company: 335,000 per year for next 8 years
2. Your company's required return: 12%
3. An outsourcing contract has been negotiated with the following payment terms: 10,000 for the first year, 50,000 for the second year, 145,000 for the third year, and 420,000 per year for the following 5 years.
What is the present value for each option (keep function within the company vs. outsource)? Which option would your recommend from a financial perspective? What are some non-financial issues which should be considered when making this decision?