Suppose Alcatel-Lucent has an equity cost of capital of 10.8 %, market capitalization of

$ 10.50billion, and an enterprise value of $ 15billion. Suppose Alcatel-Lucent's debt cost of capital is 6.3 % and its marginal tax rate is 32 %.

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 48 97 75

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

(b)?

a. What is Alcatel-Lucent's WACC?______________ (Round to two decimal places.)

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 48 97 75

The NPV of the project is ______________ (Round to two decimal places.)

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

(b) each year 0 - 3?

Year 0 1 2 3

Debt Capacity: $_____ million $_____ million $________million $______million

(Round to two decimal places.)