Governors State University has just rejected a proposal from Speak and Tell (S&T), a New York public relations firm. Under the terms of the proposal, S&T has offered to meet all of the universitys external media relation needs at a fixed cost of $700,000 per year. These activities are currently performed by the university staff. The expenses associated with the media relations department during the current year were as follows. Staff salaries:$550,000 including a senior staff member is paid $90,000 and who will remain on staff to oversee the universitys interests in dealings with the public relations firm. All other staff would be let go. The university incurs additional costs for health care and other benefits at a rate of 32 per cent of staff salaries. Fixed equipment: the computers and the media equipment in the department were purchased four years ago. They cannot be used by any other department at the school and cannot be sold. Depreciation expenses from the equipment are $12,000 per year. The netbook value of the equipment is $60,000. Printing costs: if the university contracts out, it will no longer have to print external media documents which cost $120,000 this year.

1. Which of the costs listed above should be included in the consideration of the proposal?

2. Why should they be included?

3. Prepare two tables highlighting the cost schedules for each scenario and estimate the cost difference between the two choices.

4. Based solely on financial considerations, should the University accept the proposal? Why? Which other considerations could have led the University to reject the proposal? Elaborate on ethical, legal, and reputational risks. Think of any additional risks that may apply to this case. Present at least three arguments to support your position.