Suppose Alcatel-Lucent has an equity cost of capital of

9.1%,

market capitalization of

$10.95

billion, and an enterprise value of

$15

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

6.7%

and its marginal tax rate is

33%.

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,

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?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?

Alcatel-Lucent's WACC is

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in order to copy its contents into a spreadsheet.)

Year	0	1	2	3
FCF ($ million)	100	48	101	69