# Question: Consider Alcatel Lucent s project in Problem 5 In Problem 5 Suppose

Consider Alcatel-Lucent’s project in Problem 5.

In Problem 5, Suppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Alcatel-Lucent’s debt cost of capital is 6.1% and its marginal tax rate is 35%.

a. What is the free cash flow to equity for this project?

b. What is its NPV computed using the FTE method? How does it compare with the NPV based on the WACC method?

In Problem 5, Suppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Alcatel-Lucent’s debt cost of capital is 6.1% and its marginal tax rate is 35%.

a. What is the free cash flow to equity for this project?

b. What is its NPV computed using the FTE method? How does it compare with the NPV based on the WACC method?

## Relevant Questions

In year 1, AMC will earn $2000 before interest and taxes. The market expects these earnings to grow at a rate of 3% per year. The firm will make no net investments (i.e., capital expenditures will equal depreciation) or ...Tybo Corporation adjusts its debt so that its interest expenses are 20% of its free cash flow. Tybo is considering an expansion that will generate free cash flows of $2.5 million this year and is expected to grow at a rate ...XL Sports is expected to generate free cash flows of $10.9 million per year. XL has permanent debt of $40 million, a tax rate of 40%, and an unlevered cost of capital of 10%.a. What is the value of XL’s equity using the ...Under the assumptions that Ideko’s market share will increase by 0.5% per year (implying that the investment, financing, and depreciation will be adjusted as described in Problems 3 and 4) and that the forecasts in Table ...Approximately what expected future long-run growth rate would provide the same EBITDA multiple in 2010 as Ideko has today (i.e., 9.1)? Assume that the future debt-to-value ratio is held constant at 40%; the debt cost of ...Post your question