Question

The required return during the non-constant portion of a company's growth will be ____________ than the required return during the constant growth period of a company's life.

A.	Greater or less than depending on the company's beta
B.	Equal to
C.	Less than
D.	Greater than

Answer 1

Required return during the non constant portion of company's growth will be EQUAL TO required return during the constant growth period of a company's life because investors are mostly consistent about their rate of return from the company irrespective of the life cycle of the company and risk related to the investment. The required rate of return is generally constant in nature and it does not fluctuate due to changes in the growth structure of a company in between.

Non constant growth in a company is reflection of higher level of uncertainty but investor will still require the required return during the non constant portion of the company's growth to be equal to required return during the constant growth period.

other options are not true because they are reflecting something else

Correct answer will be option (B) EQUAL TO.