In a Miller-Modigliani world where capital structure does not affect firm value, which of the following statements is false?

1) Increasing firm leverage can increase both the cost of debt and the cost of equity, yet the WACC stays constant.

2) For a risky firm, increasing leverage always increases the cost of equity.

3) As the amount of debt increases, the cost of debt approaches the required return on the assets.

4) The WACC decreases as a firm replaces equity with debt that has a lower cost.