Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $1.48 million per year, growing at a rate of 2.4%

per year. Goodyear has an equity cost of capital of 8.4%, a debt cost of capital of 6.8%, a marginal corporate tax rate of 36%, and a debt-equity ratio of 2.4. If the plant has average risk and Goodyear plans to maintain a constant debt-equity ratio, what after-tax amount must it receive for the plant for the divestiture to be profitable?

2.Suppose Alcatel-Lucent has an equity cost of capital of 10.4%, market capitalization of $10.08 billion, and an enterprise value of $14.0 billion with a debt cost of capital of 6.1% 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 following expected free cash flows?

Year	0	1	2	3
FCF ($ million)	negative 100100	4646	9595	7575

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