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Suppose? Alcatel-Lucent has an equity cost of capital of 10.4 % ?, market capitalization of $ 10.22 ?billion, and an enterprise value of $ 14.0 billion with a debt cost of capital of 5.9 % 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 100 45 105 75 c. If? Alcatel-Lucent maintains its? debt-equity ratio, what is the debt capacity of the project in part ?(b?)?
Calculate the possible arbitrage profits given the following environment. Make sure you show all calculations and explain the steps needed to realize the profit.
(NPV, PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $1,800,000, and the project would generate in..
Define the term "capital intensity." Assuming all other elements are held constant, how would a decline in the capital intensity of a firm affect additional funds needed (AFN)? Would economies of scale combined with rapid growth affect capital in..
Duke Energy has recently issued a bond with the following characteristics: maturity: 20 years, coupon rate: 8% (paid semi-annually), face value: $1000. Your investment advisor has told you that the yield-to-maturity on this bond is 7%. What should be..
You hold a portfolio of stocks with a value of $1,000,000. You expect that you will be selling the stocks in the portfolio in one year. You are considering hedging your market risk by using the 1-yr S&P 500 Index Future. What side of the futures posi..
Michael went deer hunting with Ed. After seeing bushes move, Michael quickly fired his rifle at what he thought was a deer. However, Ed caused the movement in the bushes and was seriously injured by the bullet. Ed survived and later sued Michael on t..
Emperor’s Clothes Fashions can invest $6 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 7 million jars of makeup a year. Fixed costs are $2.5 million a year, and variable costs..
You have $20,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 11 percent. Assume your goal is to create a portfolio with an expected return of 12.55 percent. How..
You are trying to estimate the country equity risk premium for Poland. You find that S&P has assigned an A rating to Poland and that Poland has issued euro-denominated Bonds that yield 7.6%. in the market currently.
Your car dealer is willing to lease you a new car for $299 a month for 60 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 4.9%, what is the current value of the lease..
Red Roofs, Inc. has current liabilities of $24,300 and accounts receivable of $7,800. The firm has total assets of $43,100 and net fixed assets of $23,700. The owners' equity has a book value of $21,400. What is the amount of the net working capital?..
What is the value of the common stock based on the market price of the bond?
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