projects are often embedded with

4. Dividend policy Aa Aa E 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 case of Purple Sage Producers Inc., and answer the question that follows: Purple Sage Producers Inc. is an oil drilling company and has some free cash flow that is not expected to be used to finance future growth or potential investment projects. The company plans to distribute its free cash flow to its shareholders but is still deciding whether the distribution should take the form of a stock repurchase or the payment of a cash dividend. Which of the following is a characteristic of a firm's optimal distribution policy? It maximizes the firm's return on equity. It maximizes the firm's total assets. It maximizes the firm's intrinsic value. It maximizes the firm's earnings per share. Which of the following statements is true? Taxes on dividend income s are paid when the stock is sold. Taxes on dividend income are paid in the year that they are received. O