AOL is considering two proposals to overhaul its network infrastructure. They have two bids. The first bid from Huawei will require a $15 million upfront investment and will generate $20 million in savings for AOL each year for the next three years. The second bid from Cisco requires an $81 million upfront investment and will generate $60 million in savings each year for the next three years.

What is the IRR for AOL associated with each bid?:

The IRR associated with the bid from Huawei is __________ %. (Round to one decimal place.)

The IRR associated with the bid from Cisco is __________ %. (Round to one decimal place.)

If the cost of capital for this investment is 14%, what is the NPV for each bid?:

The NPV for Huaweis bid is $__________ million. (Round to two decimal places.)

The NPV for Ciscos bid is $__________ million. (Round to two decimal places.)

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 three years. AOLs savings will be the same as with Ciscos original bid. The IRR of the Cisco bid is now __________%. (Round to one decimal place.)

The new NPV is $__________ million. (Round to two decimal places.)

AOL should:

A. choose Huawei.

B. choose Cisco without lease.

C. choose Cisco with lease.

D. take none of the bids.