A firm$$s debt financing decisions are generally affected by firm$-$specific factors as well as market, regulatory, and macro$-$economic conditions. You are asked to discuss the individual impact of five different scenarios $($assuming everything else remains constant$)$ on a firm$$s debt financing decisions. Please be specific and provide the theoretical and empirical rationales in support of your responses. You can use the space provided in the table below or use a separate sheet.

Scenarios Impact on debt Financing

$1.$ Variance of the firm$$s cash flows is expected to decrease.

$2.$ The U$.$S$.$ corporate tax rate is expected to increase.

$3.$ Investment in facilities and other tangible assets are expected to increase.

$4.$ New international acquisitions have diversified the firm$$s overall operation.

$5.$ Securities and Exchange Commission $($SEC$)$ is expected to question the firm for possible misrepresentation of its annual reports.

$6.$ The firm ha pursued an aggressive strategy to build financial slack $($cash$,$ marketable securities$,$ cash flow$).$