P18-11 (similar to) Question Help Suppose Alcatel-Lucent has an equity cost of capital of 11%, market capitalization of 59.52 billion, and an enterprise value of $14 billion. Assume Alcatel-Lucent's debt cost of capital is 6.5%, its marginal tax rate is 32%, the WACC is 8.89%, and it maintains a constant debt-equity ratio. The firm has a project with average risk. Expected free cash flow, debt capacity, and interest payments are shown in the table ! a. What is the free cash flow to equity for this project? b. What is its NPV computed using the FTE method? How does it compare with the NPV based on the WACC method? a. What is the free cash flow to equity for this project? The free cash flow to equity for this project in: (Round all answers to two decimal places. Use a minus sign to indicate a negative number) Year 1 2 FCFE (5 million) 0 Data Table (Click on the following icon in order to copy its contents into a spreadsheet.) Year FCF (5 million) D=dx Interest 0 -100 59.55 0.00 1 48 49.48 3.87 2 105 20 28 3.22 3 69 0.00 1.32 Print Done Enter your answer in the edt fields and then click Check Ans P18-13 (similar to) Question Help Prokter and Gramble (PKGR) has historically maintained a debt-equity ratio of approximately 0.23. Its current stock price is $53 per share, with 29 billion shares outstanding. The firm enjoys very stable demand for its products, and consequently it has a low equity beta of 0.575 and can borrow at 3.8%, just 20 basis points over the risk-free rate of 3.6%. The expected return of the market is 9.7%, and PKGR's tax rate is 25% a. This year, PKGR is expected to have free cash flows of $5.4 billion. What constant expected growth rate of free cash flow is consistent with its current stock price? b. PKGR believes it can increase debt without any serious risk of distress or other costs. With a higher debt-equity ratio of 0.575, it believes its borrowing costs will rise only slightly to 4.1%. If PKGR announces that it will raise its debt-equity ratio to 0.575 through a leveraged recap, determine the increase or decrease in the stock price that would result from the anticipated tax savings. a. This year, PKGR is expected to have free cash flows of $5.4 billion. What constant expected growth rate of free cash flow is consistent with its current stock price? The constant expected growth rate of free cash flow is consistent with its current stock price is % (Round to two decimal places.)