Final answer:
Purple Lemon Fruit Company will become less risky over time, and its value will increase.
Step-by-step explanation:
The answer to the question is D. Less risky over time, and its value will increase.
Purple Lemon Fruit Company has two divisions, one that is very risky and the other that exhibits significantly less risk. When evaluating investment projects, the company uses its investors' overall required rate of return. Over time, the firm is most likely to become less risky and as a result, its value will increase.
Risk and return are inversely related in finance. As a company becomes less risky, investors will demand a lower rate of return for investing in that company. This will increase the value of the company as its potential returns become more attractive compared to its level of risk.