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 $20million in savings for AOL each year for the next 33years. The second bid from Cisco requires a $90million 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 $25 million upfront, and $35 million per year for the next 33years. 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?

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

The IRR associated with the first bid from Huawei is ?