Question: please, help on homework problem. Facebook is considering two proposals to overhaul its network infrastructure They have received two bids. The first bid from Huawei
please, help on homework problem. 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 3 years The second bid from Cisco requires a $83 million upfront investment and will generato $60 million in savings each year for the next 3 years a. What is the IRR for Facebook associated with each bid? b. If the cost of capital for each investment is 20%, what is the not present value (NPV) for Facebook of each bid? Suppose Cisco modifies its bid by offering a lease contract instead Under the terms of the lease, Facebook will pay $28 million upfront, and $35 million per year for the next 3 years. Facebook's savings will be the same as with Cisco's original bid c. Including its savings, what are Facebook's net cash flow under the lease contract? What is the IRR of the Cisco bid now? d. Is this new bid a better deal for Facebook than Cisco's original bid? Explain a. What is the IRR for Facebook associated with each bid? The IRR associated with the first bid from Huawei is % (Round to ono 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 Huawer's bid is million (Round to two decimal places) The NPV for the Cisco opportunity is $ million (Round to two decimal places) Suppose Cisco modifies its bid by offering a loase contract instead Under the terms of the lease, Facebook will pay $28 million upfront and 535 million per year for the next 3 years Facebook's savings will be the same as with Cisco's original bid c What are Facebook's net cash flow under the lease contract? (Round to the nearest integer) Year 0 1 2 3 Cash Flow (in millions of dollars)
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
