Consider the following information about two firms that have identical cash flows and identical levels of risk: Firm A Firm B Earnings ('s) 3,000,000 3,000,000 Equity ('s) 12,000,000 10,000,000 Debt ('s) 0 5,000,000 The debt is a 10% irredeemable bond. (a) Show that Mr. Brains, who owns 10% of the equity of firm B, can increase his income by switching from firm B to A. [50%] (b) Assuming no taxes, what are the implications of the Traditionalist and Miller-Modigliani theories on the determination of a company's capital structure assuming no taxes for financial manager? [50%]