1. Suppose Lucent Technologies has $6.2 billion net debt and an enterprise value of $26.6 billion. Lucents debt has a 3.5% coupon with 9 years and 265 days to maturity and trades at $85.00. Its marginal tax rate is 42%. The 10 year T bond rate is 2.48%, stock unlevered beta is 2.24, and the risk premium is 5.5%. Assume debt beta is not zero, use Fernandez formulas and compute final answers using at least 2 decimal places.

1. What is Lucents WACC?
2. If Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the following expected free cash flows?

Year	0	1	2	3
FCF	-2500	1500	2500	1400

3. What is Lucents unlevered cost of capital?
4. What is the APV value of the project?
5. What is the free cash flow to equity and NPV under the FTE method?