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. Contract License In-house First cost, $ 0 −2 −20 Annual cost, $ per year −1 −0.2 −4 Annual revenue, $ per year 2.5 1.3 8 Life, years 5 10 ∞
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.
Contract License In-house
First cost, $ 0 −2 −20
Annual cost, $ per year −1 −0.2 −4
Annual revenue, $ per year 2.5 1.3 8
Life, years 5 10 ∞
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