3. Answer the question based on the framework of Modigliani and Miller Propositions.

   In a world with no taxes, no transaction costs, and no bankruptcy costs (or costs of financial distress), if a firm issues equity to repurchase some of its debt (leveraged recapitalization), the price per share of the firms stock will rise because the shares are less risky.

   The statement is ______________________. A) True B) False C) Uncertain

4. Ignoring taxes, transaction costs, and other imperfections. If a firm repurchases shares instead of paying cash dividends, the primary diffrence will be an increase in the _________. A) total value received by each investor B) total earnings of the firm

   C) earnings per share D) number of shares outstanding