User Account

All Pages

What is the irr for aol associated with each bid

Assignment Help Finance Basics
Reference no: EM131318685

AOL is considering two proposals to overhaul its network infrastructure.  They have received two bids.  The first bid from Huawei will require a $18 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 each bid?

b. If the cost of capital for each investment is 13%, 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 $28 million upfront, and $35 million per year for the next 3 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: EM131318685

Questions Cloud

Stock price before the ex-dividend date : Suppose Chapman Corporation is planning to pay a $2 per share dividend to its common stockholders. If the common stock price after the ex-dividend date is $50, what was the stock price before the ex-dividend date?
Use the analytical method and determine the var : Use the analytical method and determine the VAR at a probability of 0.05 for a portfolio in which the standard deviation of annual returns is $2.5 million. Assume an expected return of $0.0.
How is the brain affected in schizophrenia : Differentiate between dissociative identity disorder and schizophrenia. What key concepts may confuse the two disorders? Explain why they are separate.Describe schizophrenia and dissociative disorders and their symptoms and subtypes, as applicable..
Plant for the divestiture to be profitable : Goodyear has an equity cost of capital of 8.7%, a debt cost of capital of 7.1%, a marginal corporate tax rate of 36%, and a debt-equity ratio of 2.6. If the plant has average risk and Goodyear plans to maintain a constant debt-equity ratio, what a..
What is the irr for aol associated with 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 $18 million upfront investment and will generate $20 million in savings for AOL each year for the next..
Draw a state-transition diagram for the rrm : Consider building an RRM for a 15-word fully associative cache. Write a mathematical expression for the number of bits in the ROM required in a ROMand-register implementation of this RRM. (You need not calculate the numerical answer.)
Evaluate three peer-reviewed research studies : Evaluate three peer-reviewed research studies using the Research Analysis.Conceptualize the disorder using the DSM, diathesis stress or biopsychosocial model. Very important this must be included.Discuss the treatments or interventions that have been..
What type of auto insurance is required in north carolina : Research and summarize what type of auto insurance is required in the state of North Carolina.  Andrew received notice from his auto insurer that it would not renew his auto insurance policy.
List as many problems as you can find with this strategy : A simple strategy for aborting G-machine instructions when page faults occur would be simply to reset the G machine's program counter and stack pointer to the values they had when the current instruction began to execute. List as many problems as ..

Reviews

Write a Review

Finance Basics Questions & Answers

  What information can the pro-forma earnings number

What information can the pro-forma earnings number provide that the GAAP earnings number does not,  Give examples from Facebook of the possible differences that might exist between the two earnings numbers.

  What is the lease worth today

What is the lease worth Today? As one of J & B's analysts, what is your recommendation as to when the company should begin drilling?

  Give a brief description of csl ltd

Give a brief description of CSL Ltd.

  What is the cash flow to stockholders during 2010

What is the operating cash flow during 2010? (Do not include the dollar sign.

  Generate the following income stream

suppose your firm is planning to invest in a project that will generate the following income stream, a negative flow $300000 per year for 5 years , a positive flow of $450000 in the sixth year and a positive flow of $ 650000 per year in years 7 th..

  Which of the following actions proposed by the cfo

Which of the following actions proposed by the CFO do you believe will actually achieve this objective? Why or why not?

  Calculate the values for the following four formulas

Calculate the values for the following four formulas:Total Variable Cost = (Number of Workers x Worker's Daily Wage) + Other Variable Costs

  A firms bonds have a maturity of 10 years with a 1000 face

a firms bonds have a maturity of 10 years with a 1000 face value an 8 percent semiannual coupon are callable in 5

  Discovered and announced immediately

Discovered and announced immediately

  Whether the safe firm can sell a bond

Consider the example in given Figure with asymmetric information: - For the given cases,  - say whether the safe firm can sell a bond, and whether the risky firm can sell a bond.

  What are the three categories of wildland fires

What single disaster type caused nine of the top ten natural disasters ranked by FEMA relief costs?

  What value would bret assign to the medtrans stock

James and Bret agree that the required return for Medtrans is 13%.

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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