Finance homework for paven1001 | Business & Finance homework help
The net present value of the growth opportunities (NPVGO) will decrease if a firm’s return on equity (ROE) is less than the required return. This is due to the fact that a lower ROE implies that the company is unable to generate enough profits from its current operations which effectively reduces the amount of funds available for investing in new initiatives. As such, any potential returns from these ventures would need to be discounted at a higher rate in order to account for this additional risk which would then lead to an overall decrease in NPVGO.