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 $90 million upfront investment and will generate $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 15%, what is the net 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.

Vijay

a. What is the net present value (at the discount rate of 10%) of this project?b. Perot’s engineers have determined that spending $10 million more on development will allow them to add even more advanced features. Having a more advanced chip will allow them to price the chip $50 higher in both years ($870 for year 1 and $700 for year 2). What is the NPV of the project if this option is implemented?c. If sales are only 200,000 the first year and 100,000 the second year, what would the NPV of the project be? Assume the development costs and sales price are as originally estimated. Development cost - $1,250,000Estimated development time - 9 monthsPilot testing - $200,000Ramp-up cost - $400,000Marketing and support cost - $150,000/yrSales & Production volume - $60,000/yrUnit production cost - $100Unit price - $205Interest rate - 8%

What information does the payback period provide? Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project's net present value (NPV). You don't know the project's initial cost, but you do know the project's regular, or conventional, payback period is 2.50 years. If the project's weighted average cost of capital (WACC) is 9%, the project's NPV (rounded to the nearest dollar) is: $355,048 $287,420 $405,769 $338,141 Which of the following statements indicate a disadvantage of using the regular payback period (not the discounted payback period) for capital budgeting decisions? Check all that apply. The payback period does not take the time value of money into account. The payback period is calculated using net income instead of cash flows. The payback period does not take the project's entire life into account.

Your answer is partially correct. Sunland Company is considering a long-term investment project called ZIP. ZIP will require an investment of $123,600. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $82,400, and annual cash outflows would increase by $41,200. The company's required rate of return is 12%. Click here to view the factor table. Calculate the internal rate of return on this project. (Round answers to whole number (e.g., 15%).) Internal rate of return on this project is between 3 % and 1539 % Determine whether this project should be accepted? The project should be accepted.