According to MM Proposition II: According to MM Proposition II: a firms cost of equity is a positive linear function of the firm's capital structure. the capital structure of a firm is irrelevant to the value of the firm. the cost of equity is equivalent to the required return on the total assets of a levered firm. the cost of debt is inversely related to a firms debt-equity ratio. the cost of levered equity depends solely on the return on debt, the debt-equity ratio, and the tax rate