Which of the following statements is most correct? O a. 70% of the dividends received by corporations is excluded from taxable income. Retained earnings, as reported on the balance sheet, represents the amount of cash a company has available to pay out as dividends to shareholders. O c. The corporate tax system favors equity financing, as dividends paid are deductible from corporate taxes. Because taxes on long-term capital gains are not paid until the gain is realized, investors must pay the top individual tax rate on " that gain. O e. 70% of the interest received by corporations is excluded from taxable income. Watson Oil recently reported in millions) $8,250 of sales, $5,750 of operating costs other than depreciation, and $1,175 of depreciation. The company had $3,200 of outstanding bonds that carry a 5% interest rate, and its ate, and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate future sales and cash flows, the firm was required to make $1,250 of capital expenditures on new fixed assets and to invest $300 in net operating working capital. By how much did the firm's net income exceed its free cash flow? O a. $220 Ob. $249 O c. $238 d. $271 O e. $236