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Suppose Alcatel-Lucent has an equity cost of capital of 9.6%, market capitalization of $10.08 billion, and an enterprise value of $14 billion. Suppose Alcatel-Lucent's debt
Suppose Alcatel-Lucent has an equity cost of capital of 9.6%, market capitalization of $10.08 billion, and an enterprise value of $14 billion. Suppose Alcatel-Lucent's debt cost of capital is 6% and its marginal tax rate is 36%. a. What is Alcatel-Lucent's WACC? b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the expected free cash flows as shown here, : ? c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)? a. What is Alcatel-Lucent's WACC? Alcatel-Lucent's WACC is %. (Round to two decimal places.) x Data Table - (Click on the following icon 2 in order to copy its contents into a spreadsheet.) 1 2 3 Year FCF ($ million) 0 - 100 45 102 66 Print Done
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