Chapter 13 Assignment 4. UIVideno poucy A firm's value depends on its expected free cash flow and its cost of capital Distributions made in the form of dividends or stock repurchases impact the firm's value and the investors in different ways. Consider the scenario, and answer the questions that follow! InOutil Company is an oil drilling company and has some free cash flow that is not expected to be used for growth or investment projects. The company plans to distribute to its shareholders but is still deciding whether they should conduct a stock repurchase or distribute dividends. Which of the following is a characteristic of a firm's optimal dividend policy? It maximizes the firm's return on equity. It maximizes the firm's earnings per share. It maximizes the firm's total assets. It maximizes the firm's stock price. Which of these statements is true? Taxes on dividends are paid when the stock is sold. Taxes on dividends are paid in the year that they are received. Consequently, the tax code encourages many individual investors to prefer CCU LUC used projects. The company plans to distribute to its shareholders but is still deciding whether they should com distribute dividends. Which of the following is a characteristic of a firm's optimal dividend policy? It maximizes the firm's return on equity. It maximizes the firm's earnings per share. It maximizes the firm's total assets. It maximizes the firm's stock price. Which of these statements is true? Taxes on dividends are paid when the stock is sold. capital gains Taxes on dividends are paid in the year that they are dividends Consequently, the tax code encourages many individual investors to prefer