How would you then create home-made dividends to increase

Reference no: EM133491925

Question: You own 100 shares of the stock of unlevered Siena company which has 1,000 shares outstanding. Siena plans to pay $4,600 dividend at the end of the current year (i.e. at the end of one year from today) and a liquidating dividend of $10,580 at the end of 2 years from today. The required (expected) return on Siena's stock is 15%. Ignoring personal taxes and transaction costs:

Suppose Siena does not increase its $4,600 dividend payout at the end of the current year by issuing new stock of value $1,886 at the end of the current year. How would you then create home-made dividends to increase your dividend at the end of the current year?

Reference no: EM133491925

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