The free cash flow hypothesis states:

Question $1$Select one:

a$.$

that firms with higher levels of free cash flow should reward their managers with bonuses.

b$.$

that firms with greater free cash flow will pay more in dividends thereby reducing the risk of 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 issuing debt requires interest and principal payments to be paid thereby reducing the potential of management to waste resources.