Suppose Alcatel-Lucent has an equity cost of capital of 9.4%, market capitalization of $11.04 billion, and an enterprise value of $16 billion. Suppose Alcatel-Lucent's debt cost of capital is 5.8% and its marginal tax rate is 34%.

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:

FCF ($ million) (Year 0) -100 (Year 1) 49 (Year 2) 102 (Year 3) 73

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

(b)?