4. Paliflex Corp. needs new capital, but is having difficulty raising it. The firm’s stock price is at a 10-year low, so selling new equity means giving up an interest in the company for a very low price. The debt market is tight and interest rates are unusually high, making borrowing difficult and expensive. In fact, Paliflex isn’t certain that anyone will lend to it because it’s a fairly risky company.

On the other hand, the firm’s long-term prospects are good, and management feels the stock price will recover within a year or two. Ideally, management would like to expand the company’s equity base, so it can borrow more later on, but at the moment the stock price is just too low.

Suggest a capital strategy that addresses both the short and long run, explaining why it is likely to work.