Free Wheels has a plant that assembles bicycles. The plant currently has a small cafeteria for the workers, but the kitchen equipment is in need of a substantial overhaul. Free Wheels has been offered a contract by Besteats to supply food to the workers. The particulars of the situation are shown in the table. Should Free Wheels continue with the in-house food service or contract the service to Besteats?

Food Service: In-House Versus Contract Food service labour (hours/year) 6000 Wage rate (real, time 1, $/hour) 15 Overhead cost (real, time 1, $/year) 18 000 Kitchen equipment first cost (current, time 0, $) 25 000 Contract cost, years 1 to 3 (current $) 55 000 Contract cost, years 4 to 6 (current $) 63 700 Current dollar MARR 22% Expected annual inflation rate 5% Study period (years) 6