What is the net present value of each bid

Assignment Help Finance Basics
Reference no: EM131933325

Question: AOL is considering two proposals to overhaul its network infrastructure. They have received two bids. The first bid from Huawei will require a $20 million upfront investment and will generate $20 million in savings for AOL each year for the next 33 years. The second bid from Cisco requires a $90 million upfront investment and will generate $60 million in savings each year for the next 33 years.

a. What is the IRR for AOL associated with each? bid?

b. If the cost of capital for each investment is 17%, 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 the lease, AOL will pay $ $26 million upfront, and $35 million per year for the next 33 years. AOL's savings will be the same as with Cisco's original bid.

c. What is the IRR of the Cisco bid now?

d. What is the new NPV?

e. What should AOL do?

Reference no: EM131933325

Questions Cloud

What are some processes of data collection : What are some processes of data collection? Give at least two examples.
What is the maximum revenue in million dollars : How many of each manufacturing plant are they able to build with the maximum revenue and available money?
Describe and analyze a recent intercultural encounter : Instructions: Describe and analyze a recent intercultural encounter with someone of a different age, ethnicity, race, or religion.
Determine whether rolles theorem can be applied to function : etermine whether Rolle's Theorem can be applied to function - Apply the First Derivative Test to identify any relative extrema.
What is the net present value of each bid : AOL is considering two proposals to overhaul its network infrastructure. They have received two bids. The first bid from Huawei will require a $20 million.
Approaches behind mastering intercultural communication : Need a better understanding of some reasons and approaches behind mastering intercultural communication
Explain the terrorism and counterterrorism : Explain some of the ways in which today's terrorists (domestic and international) are using the Internet to communicate with and recruit others.
Developed the basics of a company website : Assume that you have started a landscaping company and have developed the basics of a company website.
How did you learn to adopt the new culture : How did you learn to adopt the new culture? How learning their culture can help you in your work place? what are the difficulty in the new culture?

Reviews

Write a Review

Finance Basics Questions & Answers

  Prepare two financial ratios for each stock

Using the information and formulas from your textbook, please prepare two financial ratios for each stock, using the 2015 & 2016 financial statements.

  Compare assessment of face content and construct validity

Compare the assessment of face, content, and construct validity. Which of the three approaches is most objective, and why? Is it possible to have a measure that is construct valid but not face valid?

  What equal annual ammount must garrett save at the end

What equal annual ammount must Garrett save at the end of each year (the first deposit will occur on his 31st and the last deposit will occur on his 60th birthday) to meet these retirement goals?

  Equity in the computation of solar shade wacc

Solar Shades has 5.9 million shares of common stock outstanding, 4.9 million shares of preferred stock outstanding, and 19 thousand bonds.

  Clearly identify what section of the policy is controlling

Amber has a Homeowners 3 policy. The dwelling is insured for $75,000 and the replacement cost of the home is $100,000. Indicate whether or not each of the following losses is covered. If possible, determine the dollar amount of the loss that..

  Capm to calculate the cost of equity capital

Wyden Brothers uses the CAPM to calculate the cost of equity capital. The company's capital structure consists of common stock, preferred stock, and debt.

  What is the net income for each of the years listed

Examine the table that follows. Then answer the following questions. What is the net income for each of the years listed? How did you find the answer?

  Estimating the revenue and expense

Illustrate how your venture would perform by estimating the revenue and expense to calculate operating profit or loss. Include estimates of your venture's main sources of revenue and the expenses expected in the main cost categories such as the co..

  Mill mountain coffee company currently operates

Mill Mountain Coffee Company currently operates 12 coffee shops in downtown Charlotte. The company has been losing money and wants to downsize by closing some stores.

  Select an organization that either has or is experiencing

select an organization that either has or is experiencing challenges with its compensation and benefit system. the

  What are the portfolio weights of stock

An investor owns $2,500 of Adobe Systems stock, $3,500 of Dow Chemical, and $3,500 of Office Depot. What are the portfolio weights of each stock?

  Spartan stores is expanding operations with the

spartan stores is expanding operations with the introduction of a new distribution center. not only will sales increase

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd