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What is the irr for aol associated with each bid

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Reference no: EM131388294

AOL is considering two proposals to overhaul its network infrastructure. They have received two bids. The first bid from Huawei will require a $16 million upfront investment and will generate $20 million in savings for AOL each year for the next 3 years. The second bid from Cisco requires a $96 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 with eachbid?

b. If the cost of capital for each investment is 16%,what is the net present value (NPV)of each bid?

Suppose Cisco modifies its bid by offering a lease contract instead. Under the terms of thelease, AOL will pay $27 million upfront, and $35 million per year for the next 3 . What is the IRR of the Cisco bid now?

d. What is the newNPV?

e. What should AOLdo?

Reference no: EM131388294

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