Due to large losses incurred in the past several years, a firm has $2
billion in tax-loss carryforwards.
This means that the next $2 billion of the firm?s income will be free
from corporate
income taxes. Security analysts estimate that it will take many years
for the firm to generate
$2 billion in earnings. The firm has a moderate amount of debt in its
capital structure.
The firm?s CEO is deciding whether to issue debt or equity in order to
raise the funds needed
to finance an upcoming project.Which method of financing would you
recommend? Explain.

If you believe the Miller Modigliani hypothesis, it doesn't matter. 
According to them, the only reason to issue debt is that it creates a
tax shield.  If the firm has tax loss carryforwards, then then they
have no use for a tax shield and debt and equity are interchangable.