Hemisphere, LLC is planning to outsource its 51-person information technology (IT) department to Dyonyx. Hemisphere’s president believes this move will allow access to cutting-edge technologies and skill sets that would be cost prohibitive to obtain on its own. If it is assumed that the loaded cost of an IT employee is $100,000 per year and that Hemisphere will save 25% of this cost through outsourcing, determine the present worth of the total savings for a 5-year contract at an interest rate of 6% per year, compounded monthly.
What will be an ideal response?
P = 51(100,000)(0.25)(P/A,0.5%,60)
= (1,275,000)(51.7256)
= $65,950,140
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