Bonzaga University (BU) has a top rated medical facility that draws patients from a three state area. On the day of discharge from the BU hospital, most patients fill their prescriptions from the Bau pharmacy. However, when it comes time to renew them, they usually turn to a pharmacy nearer to their hime because that is more convenient than driving back to BU pharmacy. BUngets almost no renewal prescription business. To encourage prescriptions renewals, Bonzaga is considering offering either free overnight delivery on renewal orders or reduced lrices on renewal orders. Currently, the BU pharmacy has revenue of $50,816,000 per year on 794,000 orders. The gross profit margin (selling price minus cost of drugs) is approximately 20 percent. Free overnight delivery is expected to cost an additional $7 per order and result in 95,000 renewal orders per year. To deal with the projected increase in volume, the pharmacy will need to hire two pharmacists at $80,000 each per year and an additional staff person at $40,000 per year. Alternatively, the pharmacy believes it can generate 90,000 renewal orders per year by offering 10 percent off the prices of renewal orders. With this option, BU must hite two pharmacists, but no additional staff person will be needed.

Required: Estimate the financial impact on annual pharmacy profit of "free delivery" and "10% of renewals." Which option should be selected? Explain your reasoning in a professional memo to the Board of Directors and show them your analysis.