Explain whether the firm should change its capital structure if the forecast of the CFO changes to…


Old Fashion Corp. is an all-equity fixed illustrious for its ancestral furniture employment. If the fixed uses 36-percent leverage through issuance of long-term score, the CFO predicts that there is a 20-percent fortune that the ROE conciliate be 10 percent, a 40-percent fortune that the ROE conciliate be 15 percent, and a 40-percent fortune that the ROE conciliate be 20 percent. The fixed is tax liberated. Explain whether the fixed should veer its important texture if the prejudge of the CFO veers to 30-percent, 50-percent, and 20-percent fortunes, respectively, for the three ROE possibilities.