Suppose Alcatel-Lucent has an equity cost of capital of 9.9%, market capitalization of $10.50

billion, and an enterprise value of $15 billion. Assume that Alcatel-Lucent's debt cost of capital is 7.4%, its marginal tax rate is 38%, the WACC is 8.3064%, and it maintains a constant debt-equity ratio. The firm has a project with average risk. The expected free cash flow, levered value, and debt capacity are as follows:

Year	0	1	2	3
FCF ($ million)	-100	46	99	67
@i{V}@Sup{@i{L}}	179.61	148.52	61.86	0
@i{D}=@i{d}×@i{V}@Sup{@i{L}}	53.88	44.56	18.56	0

.

Thus, the NPV of the project calculated using the WACC method is

$179.61 million$100 million=$79.61 million.

a.Alcatel-Lucent's unlevered cost of capital is

enter your response here%.

(Round to four decimal places.)

b. What is the unlevered value of the project?

The unlevered value of the project is

$enter your response here

million.(Round to two decimal places.)

c. What are the interest tax shields from the project? What is their present value?

The present value of the interest tax shields from the project is

$enter your response here

million.(Round to two decimal places.)

d. Show that the APV of Alcatel-Lucent's project matches the value computed using the WACC method.

The value of the project calculated using the APV method is

$enter your response here

million.(Round to two decimal places.)

This is the same value as the NPV found using the WACC method.