Outsourcing online consultants - Rachel may move her entire online service team to India. As she has tried to re-sign existing clients and win new business Rachel has been feeling pricing and margin pressure. For the time being Rachel has only re-signed or sought new business that matches her current margin profile. Rachel expects to be able to maintain the status quo in the online services business for several more years. However, for the most part Rachels regional and national competitors have outsourced online support to low-cost countries. ESIs higher cost structure limits the future growth of ESI services. ESIs five full time online consultants each make $60,000 per year. The online segment cost of goods sold is a little more than the $300,000 paid to the consultants in the most recent year. Consulting EBITDA is approximately $147,450. If ESI does not outsource its consultants it is estimated consultant margin dollars will remain about flat for the next several years. For comparison, online consultants in India make approximately $30,000 per year, growing at 10% per year. In the first year after moving to India Rachel expects consulting EBITDA margins dollars to be the same as in the US. However, in years 2 through 10 consulting revenue should grow by 20% per year, while the increase labor cost and productivity gains of India employees should just about offset. This means ESI could maintain its current consulting EBITDA margin on a growing revenue base. Uncertainty in technology life cycles means Rachel doesnt think it is reasonable to plan an online services business beyond 10 years into the future. To make the move to India, ESI would pay the cost of a fairly generous severance. It is expected US employees would receive a package valued at 50% of annual compensation. ESI would sell five U.S. based computer terminals and desks for $8000. The setup costs in India, including new office space, equipment and telecom infrastructure is $100,000. The setup costs will be amortized over 10 years. For conservatism, after 10 years ESI assumes zero recovery on any office furniture, and no future lease liabilities. Additional Capital Budgeting Assumptions: Marginal and average corporate tax rate of 21%. Pretax cost of bank borrowing is 5%. As a private firm ESI has an internally defined required return on equity of 10%. ESIs banks charge a 2% premium for international investments. The required equity return should also be charged a risk premium over domestic investments. ESI expects to maintain the ratio of equity and long-term liabilities shown in the 202x balance sheet. The reinvestment rate earned on idle cash is 3%. Calculate the capital budgeting decision metrics for the proposed outsourcing of ESIs online help desk to New Dehli, India. Calculate each of NPV, IRR, MIRR, Payback and Profitability Index.

***Please show solutions in an excel spreadsheet***