EBK CORPORATE FINANCE
EBK CORPORATE FINANCE
4th Edition
ISBN: 8220103145947
Author: DeMarzo
Publisher: PEARSON
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Chapter 18, Problem 6P

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%.

  1. a. What is Alcatel-Lucent’s WACC?
  2. 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?Chapter 18, Problem 6P, Suppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of 10.8 billion,
  3. c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part b?
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EBK CORPORATE FINANCE

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