Paula Worth, a private wealth advisor, saw your analysis of the LewCo cost of capital and future price (questions A & B above). She approaches you with an idea to lever the $100,000 investment so that you can purchase twice the shares of stock. She proposes to structure the investment as follow s:

Buy 250 shares of stock using the $100,000. Pledge the shares as collateral to secure a loan of another $100,000. Buy another 250 shares using the loan proceeds; thus, the investor will own a total of 500 shares of stock. The next annual dividend payment will be $5,300 , and payments will grow by 6% per year, as originally assumed. Future value is 424 and growth Rate is 8.65%

Paula suggests that you calculate the present value of the stream of dividends using the r* from question B. She says that process creates value because the present value of the levered investment exceeds the original $100,000 invested. Calculate the present value of the levered dividend stream , and explain if Paula is correct that the leverage created value .