What will? gartner levered value be in this? case

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Reference no: EM131822529

Gartner Systems has no debt and an equity cost of capital of 10.9%.

?Gartner's current market capitalization is $99 ?million, and its free cash flows are expected to grow at 3.3% per year.? Gartner's corporate tax rate is 35 %. Investors pay tax rates of 35 % on interest income and 19% on equity income.

a. Suppose Gartner adds $47 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 6.78%?, 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: EM131822529

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