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A firm's value depends on its expected free cash flow and its cost of capital....

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Finance

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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. 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 dividend policy? It maximizes the firm's total assets. It maximizes the firm's earnings per share. It maximizes the firm's stock price. It maximizes the firm's return on equity

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