1. If a typical firm reports $10 million of retained earnings on its balance sheet, could its directors declare a $10 million cash dividend without any qualms whatsoever? (Hint: Remember dividend have to be paid in CASH)

1.If a typical firm reports $10 million of retained earnings on its balance sheet, could its directors declare a $10 million cash dividend without any qualms whatsoever? (Hint: Remember dividend have to be paid in CASH)

2.Explain how the federal income tax structure affects the choice of financing (use of debt versus equity) of U.S. firms. If financing with debt is better, why doesn't everyone finance almost entirely with debt?