Indicate whether this statement is TRUE or FALSE. Provide an explanation and/or a calculation to justify your answer.

1. "Returns on LBOs are generally high because of the very high-risks involved. The reason for this is that firms that initiate LBOs generally target high-risk companies with highly volatile cash flows."
2. "Under the Australian imputation tax system and current capital gains tax arrangements, Australian resident tax payers will always prefer fully franked dividends to capital gains."