Which of the following statements concerning capital structure is not correct?

(a) Bankruptcy risk is ignored in Miller and Modigliani’s first model.

(b) Debt holders are not subject to the effects of financial risk.

(c) The traditional approach assumes that capital markets are perfect.

(d) Miller and Modigliani’s second paper takes into account the effects of corporate taxation.

(e) Miller and Modigliani’s first paper argues that no optimal capital structure exists and supports this proposition with arbitrage theory.