1. True False Spin-off cost is an important deterrent to using too much debt.

2. True False Capital structure can be part of a system designed to assure that managers maximize their own wealth by acting in the interest of the shareholders.

3. True False Expected bankruptcy costs decrease as the amount of debt increases.

4. True False Bankruptcy by itself does not decrease the value of the firm; however, the friction cost associated with bankruptcy does decrease wealth.

5. True False Information asymmetries are more likely to occur when the company is changing its strategy.