Which of the Following Statements Is True About the Free

question 13

Multiple Choice

Which of the following statements is true about the free cash flow hypothesis?

• A) Firms should distribute earnings based on investors' preferences toward current income and future income.
• B) Firms should distribute earnings that can be reinvested at a very profitable rate.
• C) Firms should pay dividends when free cash flows in excess of capital budgeting needs exist.
• D) Firms that retain free cash flows have higher values than firms that distribute free cash flows.
• E) Firms should never distribute their free cash flows.

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Definitions:

Secondary Voltage

The output voltage produced by the secondary winding of a transformer, which can be step-up or step-down relative to the primary voltage based on the turns ratio of the transformer.

Power Distribution System

A network of electrical components deployed to distribute and deliver power from the supply system to the consumer effectively.

Diagram

A diagram is a simplified drawing representing the structure or workings of something, serving as a plan, schematic, or model.

Phase Voltage

The voltage measured across a single phase in a polyphase electrical system, important for understanding the distribution of power in systems like three-phase AC currents.