Reference no: EM133185894

Question - Capital University is considering outsourcing their snow removal. Currently, it costs $3 million per year for in-house snow removal (salary costs of $500,000, fuel of $1,000,000, equipment maintenance of $500,000 and $1,000,000 in depreciation). A large snow removal company is offering to provide snow removal for $2.5 million per year for 5 years. If the snow removal is outsourced, the existing equipment can be sold for $1.2 million. This equipment has a net book value of $4 million (including $5 million in depreciation). The existing equipment has as estimated remaining useful life of 5 years. As well, most of the existing staff can be reassigned to other positions that are currently vacant, but one position (with an annual salary of $60,000) will be eliminated. One-time severance costs are $30,000. Should Capital University outsource the snow removal? Include both quantitative and qualitative considerations.