why is required return on equity more sensitive to changes in leverage?

“the required return on equity may be more sensitive to changes in financial leverage than just the changes in weighted average cost of capital (WACC).” why is this?

Higher leverage = higher cash flow uncertainty to investors = higher risk to investors = higher demand for risk premiums for additional risk arising out of leverage.

I thinnk financial leverage increases Req return on equity which as a consequence increases WACC thats why…

thanks saurabh

As an investor would you require more or less return(required return) from investing your money in a risky (more leveraged) company ?

More of course

I am not sure this really answers my question. I understand that higher leverage means higher sensitivity but why does required return show more sensitivity than wacc?

Sorry but the question you posted says req equity return is more sensitive to change in financial leverage and less sensitive to change in wacc?

apologies. I see how that could have caused confusion. the statement in the q basically says that fcfe is more sensitive to changes in leverage than wacc is. I am trying to find out why that is.

any ideas?