Question 6 (1 point) The Case: Central Canada Steel (CCS) was formed 5 years ago to exploit a new continuous- casting process. SSC's founders, Donald Brown and Margo LaPointe, had been employed in the research department of a major integrated-steel company, but when that company decided against using the new process, they decided to strike out on their own. One advantage of the new process was that it required relatively little capital in comparison with the typical steel company, so Brown and Lapointe have been able to avoid issuing new stock, and thus they own all of the shares. However, SSC has now reached the stage where outside equity capital is necessary if the firm is to achieve its growth targets yet still maintain its target capital structure of 60 percent equity and 40 percent debt. Therefore, Brown and Lapointe have decided to take the company public. Until now, Brown and Lapointe have paid themselves reasonable salaries but routinely reinvested all after-tax earnings in the firm, so dividend policy has not been an issue. However, before talking with potential outside investors, they must decide on a dividend policy. Assume that you were recently hired by Pierce Westerfield Carney (PWC), a national consulting firm, which has been asked to help SSC prepare for its public offering, Martha Millon, the senior PWC Consultant in your group, has asked you to make a presentation to Brown and Lapointe in which you review the theory of dividend policy. You need to understand the following questions before you recommend a policy to SSC. Based on your understanding answer the following questions. Question: True/False A firm may distribute cash to shareholders by repurchasing its own stock rather than paying out cash dividends. True False