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Financial Impact of Outsourcing Landscaping Functions

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With this data I need to find out:
1) The one year financial impact of outsourcing the grounds maintenance
2) How will savings in the second year differ from year one
3) Find qualitative factors that should be considered in the decision whether or not to outsource.

Here is the data for this problem:
College A is considering outsourcing their groundskeeping. They have been given a bid from Groundskeeper Willie for $250,000 per year, with the claim that he will keep the school grounds in the same condition they are in now. College A's maintenance costs for the previous year was $267,000 and is as follows:

Salary of gardeners: $185,000
Plant Materials: $65,000
Fertilizer: $5,000
Fuel: $4,000
Depreciation: $8,000
Total: $267,000

Should College A decide to go with Groundskeeper Willie's bid, they will lay off their gardeners and be able to sell equipment for $20,000.

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Solution Preview

Here are your answers:

1. One year financial impact:
Before the deal. they would have a net outflow of $267,000
After the deal. they would have a net inflow of $270,000

Bid from outsourcer = $250,000
Sale of equipment = $20.000
Total inflow = $270,000

Note: I am assuming that the outsourcer would then ...

$2.19
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