Two proposals to overhaul its network infrastrucre

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Reference no: EM131445297

AOL is considering two proposals to overhaul its network infrastructure. they have received two bids. the first bid from Huawei will require a $25 million upfront investment and will generate $20 million in savings for AOL each year for the next three years. the second bid from CISCO requires a $84 million upfront investment and will generate $60 million in savings each year for the next 3 years.

a. what is the IRR for AOL associated to each bid? b.if the cost of capital for each investment is 10%,what is the NVP of each bid?

b. suppose Cisco modifies its bids by offering a lease contract instead. under the term of the lease,AOL will pay $26 million upfront,and $35 million per year for the next 3 years.AOL's saving will be the same as with Cisco's original bid.

c. what is the IRR of the Cisco now.

d. what is the new NVP?

e. what should AOL do?

Reference no: EM131445297

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