Suppose Alcatel-Lucent has an equity cost of capital of 10.6%, market capitalization of $8.97 billion, and an enterprise value of $13 billion. Suppose Alcatel-Lucent's debt cost of capital is 6.4% and its marginal tax rate is 37%.

a. What is Alcatel-Lucent's WACC?

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,

Year	0	1	2	3
FCF ($ million)	100	53	95

year 3 is +75 million

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

(b)?