Suppose Alcatel-Lucent has an equity cost of capital of 9.5 %, market capitalization of $ 10.22 billion, and an enterprise value of $14.0 billion with a debt cost of capital of 6.8% and its marginal tax rate is 34%.
a. What is Alcatel-Lucent's WACC?
b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the following expected free cash flows? Yr- 0,1,2,3 FCF ($ million)(-100), 46, 104, 75
c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part (b)?