we find that firms are always trying to find the optimum mix of debt and equity to fund new projects. There are many tools a financial analyst can use to predict the valuation of each source of funds. We also learn that it is good to have a certain amount of debt and its good to use a certain amount of retained earnings to fund new projects. Please discuss why it is not a good idea to use all debt or all equity to fund new initiatives. Be sure to include the justification for your comments