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Price Mart Is Considering Outsourcing Its Billing Operations

question 97

Essay

Price Mart is considering outsourcing its billing operations. A consultant estimates that outsourcing should result in cash savings of $9,000 the first year, $15,000 for the next two years, and $18,000 for the next two years. Interest is at 12%. Assume cash flows occur at the end of the year.
Required: Calculate the total present value of the cash flows.


Definitions:

Outsource

The practice of hiring third-party service providers to perform tasks, handle operations, or provide services that are either difficult to manage or are outside the company's expertise.

Customized Items

Products or services tailored to meet the specific needs or preferences of an individual customer or market segment.

Mitigate Risks

The process of taking action to minimize the likelihood and impact of undesired events or risks.

Supply Managers

Professionals responsible for overseeing supply chain operations, including procurement, inventory management, and supplier relationships.

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