Facebook is considering two proposals to overhaul its network infrastructure. They have received two bids. The first bid from Huawei will require a $24 million upfront investment and will generate $ 20 million in savings for Facebook each year for the next 33 years. The second bid from Cisco requires a $97

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?

The IRR associated with the first bid from Huawei is

(Round to one decimal place.)

The IRR associated with the Cisco opportunity is

(Round to one decimal place.)

b. If the cost of capital for this investment is 20%what is the NPV of each bid?

The NPV for Huawei's bid is

(Round to two decimal places)

The NPV for the Cisco opportunity is

(Round to two decimal places)

c. What are Facebook's net cash flow under the lease contract?(Round to the nearest dollar.)

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Year

0

1

2

3

Cash Flow ($)

What is the IRR of the Cisco bid now?

The IRR of the Cisco bid is

(Round to one decimal place.)