Gartner systems has no debt and equity cost of capital

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Reference no: EM131618667

Gartner Systems has no debt and an equity cost of capital of 9.1%.

?Gartner's current market capitalization is $103 ?million, and its free cash flows are expected to grow at 2.7% per year.? Gartner's corporate tax rate is 35%. Investors pay tax rates of 37% on interest income and 18%on equity income.

a. Suppose Gartner adds $49 million in permanent debt and uses the proceeds to repurchase shares. What will? Gartner's levered value be in this? case?

b. Suppose instead Gartner decides to maintain a 50% ?debt-to-value ratio going forward. If? Gartner's debt cost of capital is 7.18%?, what will? Gartner's levered value be in this? case?

Hint?:

Make sure to round all intermediate calculations to at least four decimal places.

Reference no: EM131618667

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