Answered

Find the best answers to your questions with the help of IDNLearn.com's knowledgeable users. Ask your questions and receive detailed and reliable answers from our experienced and knowledgeable community members.

Purple Lemon Fruit Company has two divisions: one is very risky, and the other exhibits significantly less risk. The company uses its investors’ overall required rate of return to evaluate its investment projects. It is most likely that the firm will become:

Sagot :

Parrainidn

Answer: b. Riskier over time, and its value will decrease

Explanation:

Because the company is using the investor's required rate of return instead of one that takes into account the riskiness of the two division, you find that risk is not being adequately accounted for.

This would lead to a situation where the company becomes riskier because it is not accounting for its risk properly. With higher risk, the company will be unable to seek funding easily which would lead to lower investments being undertaken and an overall decrease in company value.

Thank you for using this platform to share and learn. Keep asking and answering. We appreciate every contribution you make. Your questions find answers at IDNLearn.com. Thanks for visiting, and come back for more accurate and reliable solutions.