How is Capacity affected by distance?
Short answer: Yes. Sort of.

You don't mention what medium your signal is traveling on, but distance can effect both the signal and the noise and can even effect the bandwidth in some cases.

In a wireless system the biggest thing to look at is the free space losses in your signal. The noise will stay pretty much equal regardless of distance, but your signal power will be reduced as you get farther away. The exception to this is when you have to put higher power amps on your receiver that might induce more noise into your system.

In a wired system you have both your signal power decreasing, but also your noise level increasing. Also in a wired system you can have the non-ideal aspects of a wire cause a low pass or band pass filter that will change some as you go to longer distances that you will have to keep into account.