The free cash flow hypothesis states ____________________.

A) That issuing debt requires interest and principal payments to be paid thereby reducing the potential of management to waste resources.

B) That firms with greater free cash flow will pay more in dividends thereby reducing the risk of bankruptcy (or financial distress).

C) That firms with greater free cash flow should issue new equity to help minimize the wasting of resources by managers.

D) That firms with higher levels of free cash flow should reward their managers with bonuses.