A safety & health coordinator reporting to you proposes to discontinue using an outside vendor to conduct annual employee audio-grams. The coordinator argues it will be much cheaper, saying: "Why should we spend all that money outside the company, especially when we're always being asked to find ways to save money!" The coordinator believes (s)he can personally do the work and volunteers to take on the challenge. Using Excel worksheet, Calculate and report NPV; answer whether the project deserves implementation on that basis. Calculate and interpret IRR.  What is the payback period? Provide your recommendation?  Would you be in favor of this project based on its financial and practical merits?  Should the vendor continue to be used or should the work be done in-house?

determine the discount rate, the initial investment required and the annual cash-flows (savings minus expense) for each period.  

Use these assumptions:

1. # of workers requiring annual audiograms = 550

2. Vendor's fee per audiogram = $44

3. Time required to perform each audiogram = 30 mins

4. Hearing Booth purchase = $38,500

5. License for audiogram software, one time purchase = $2,200

6. Audiometric Technician Training for the OSH coordinator, one time = $1,650

7. Safety Coordinator Hours Available per/annum = 2,288

8. Annual OSH Coordinator Personnel Costs with Cost of Benefits = $57,200

9 Maximum payback period specified by your accounting department = 5/yr

10. Additional administrative time required to be spent by the coordinator per month to manage the system = 8 hrs

11. Discount Rate = 12%