Gartner Systems has no debt and an equity cost of capital of 10.5%. Gartner's current market capitalization is $96 million, and its free cash flows are expected to grow at 3.2% per year.? Gartner's corporate tax rate is 38%. Investors pay tax rates of 36% on interest income and 18% on equity income.

a. Suppose Gartner adds $48 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 6.43%, what will Gartner's levered value be in this case?

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