Suppose Alcatel-Lucent has an equity cost of capital of

9.8%, market capitalization of $9.10 billion, and an enterprise value of

$13.0 billion with a debt cost of capital of

7.3% 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 following expected free cash flows?

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

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