Google is considering two proposals to overhaul its network...

Google is considering two proposals to overhaul its network infrastructure. They have received two bids. The first bid from ATT will require a $20 million upfront investment and will generate $20 million in savings for Google each year for the next 3 years. The second bid from Qualcom requires a $100 million upfront investment and will generate $60 million in savings each year for the next 3 years. Assume Google's cost of capital (discount rate) is 12%.

The IRR of the ATT bid is:

The IRR of the Qualcom Bid is:

The NPV of the ATT bid is:

The NPV of the Qualcom bid is:

Suppose Qualcom modifies its bid by offering a lease contract instead. Under the terms of the lease, Google will pay $20 million upfront, and $35 million per year for the next 3 years. Google's savings will be the same as with Qualcom's original bid.

Google's net cash flow under the lease contract at EOY 0 is:

Google's net cash flow under the lease contract at EOYs 1-3 is:

The IRR of Qualcom's bid under the lease contract is: