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Suppose Alcatel-Lucent has an equity cost of capital of 9.8 % market capitalization of $ 11.52 billion, and an enterprise value of $ 16.0 billion
Suppose Alcatel-Lucent has an equity cost of capital of 9.8 % market capitalization of $ 11.52 billion, and an enterprise value of $ 16.0 billion with a debt cost of capital of 7.3 % and its marginal tax rate is 37 %. If the WACC is 8.34% and the NPV is 92.16, what is the debt capacity of the project assuming the debt-equity ratio stays the same? The expected free cash flow is as follow:
YEAR 0 1 2 3
FCF ($mil) -100 51 102 74
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