$1.$ Compute a cash flow analysis of the incremental costs of outsourcing versus the status quo. This can be done in two ways:

$1.$ Calculate gross costs under the status quo, and gross costs if Lee outsources, and then take the difference.

$2.$ Focus on the differences between status quo and gross costs.

$2.$ Compute the net present value of outsourcing based on a cost of capital rate of $12\%/$year$.$AssumpcionsAssumptions