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 Lucents debt cost of capital is 6 1 and its marginal tax rate is 35 a What is Alcatel Lucents WACC b If Alcatel Lucent maintains a constant d...

a r wacc 108 144 10 144 108 144 611 035 849 b Using the WACC method the levered value of the pro ...

Suppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of $10.8 billion, and an

Question:

Suppose Alcatel-Lucent has an equity of 10%, market capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Alcatel-Lucent€™s debt is 6.1% and its marginal tax rate is 35%.
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?

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

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...