Harmony Auto Group sells and services imported and domestic cars. The owner wants to evaluate the option of outsourcing all of its new auto warranty service work to Winslow, Inc., a private repair service that works on any make and year car. Either a 5-year contract basis or 10-year license agreement is available from Winslow. Revenue from the manufacturer will be shared with no added cost incurred by the car/warranty owner. Alternatively, Harmony can continue to do warranty work in-house for the foreseeable future. Use the estimates made by the Harmony owner to perform an annual worth evaluation at 10% per year to select the best option. Monetary values are in $ million units.
 FIGURE 1.png)
AWcontract = -1 + 2.5
= $1.5 ($1,500,000)
AWlicense = -2(A/P,10%,10) - 0.2 + 1.3
= -2(0.16275) + 1.1
= $0.7745 ($774,500)
AWin-house = -20(0.10) – 4 + 8
= $2.0 ($2,000,000)
Select in-house alternative
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