Lucent Technologies is a public company. its stock is currently trading at $44. Its target capital structure is 75% equity and 25% debt. It plans on maintaining its current capital structure. Its beta is estimated to be 2.87. The current risk-free rate is 3%, market risk premium is 5%. The corporate tax rate is 25%.

a. What is your estimate for Lucent Technologies' cost of equity?

b. Suppose Lucent's debt cost of capital is 6.1%, what is Lucent's WACC?

c. Assuming Lucent technology has a 60% retention ratio, and its ROE is 10%, what is your estimate for its sustainable (long-term) growth rate?

d. Assuming its free cash flow is going to grow at a constant rate determined in question c after year 4, what is the terminal value of Lucent Technologies at the end of year 4? What is the value of operation of Lucent Technologies?

Year	1	2	3	4
FCF($M)	-100	50	70	100

e. Lucent Technologies has 20 million shares outstanding, short-term investments valued at $5 million, debt of $25 million. What is your estimate for its price per share? Is Lucent Technologies over-priced or under-priced by the market?

f. Assuming you are the CFO of Lucent Technologies, how will you improve the value of shareholders? Please propose at least three areas that Lucent Technologies can potentially work on.

Explain step by step and include Formulas please.