Suppose Alcatel-Lucent has an equity cost of capital of

10.1%,

market capitalization of

$8.97

billion, and an enterprise value of

$13

billion. Suppose Alcatel-Lucent's debt cost of capital is

5.7%

and its marginal tax rate is

37%.

b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here, what is the NPV of the project?

?c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part

(b)?

0 1 2 3 Year FCF ($ million) - 100 55 97 72