2. The Tanglefern Corporation has traditionally paid out 60% of its earnings in dividends.

Recently some marvelous growth opportunities have arisen that involve only a little risk but require a lot of cash. Most of the executive team thinks the firm should do two things to raise the cash needed to take advantage of the opportunities. They want to (1) sell more stock and (2) suspend dividend payments for two to three years. The dividend suspension would be accompanied by an explanation to stockholders of what was going on. You’re the company’s CFO.

Prepare a response to the others’ suggestion. Do the two proposed actions taken together create a particular problem?