1. When investors have incomplete information, issuing shares sends a good signal to the market.

   True

   False

2. If dividends are taxed at a higher rate than capital gains, investors should prefer share repurchases.

   True

   False

3. The value of equity should decrease by the present value of expected bankruptcy costs.

   True

   False

4. Individual investors are taxed at a lower rate on capital gains than on dividends.

   True

   False

5. With market frictions, capital structure will affect firm value.

   True

   False