In 1958 Franco Modigliani and Merton Miller (MM) published a set of research papers that revolutionized the theory of a corporation's capital structure. In their first research paper, MM proposed a set of assumptions that, on the surface, may seem unrealistic, but these assumptions and MM's algebraic opproach provided the first significant attempt to study capital structure theory in a scientific fashion. The original assumptions that were used in MM's first study were changed by MM and other researchers as the theory of capital structure evolved. Which of the following statements are assumptions that Modigliani and Miller used in their initial (MM Proposition I) model and research poper? Check all that spply. Personal taxes offset the benefits derived by corporate taxes. Stocks and bonds are traded in "perfect markets," such that there are no transaction (or brokerage) costs and all corporate and individual investors can berrow and lend at the same rate of interest. All investors are rational, and have the same expectations of a company's earnings (as measured by its EarT). A firm's earnings before interest and taxes (EBIT) is constant, and is not affected by the use of debt. There are no costs associated with o bonkruptcy. There are no taxes-either personal or corporate. Consider the following statement about a firm's capital structure: A firm's capital structure does not affect the firm's market value. A firm's capital structure does not affect the firm's market value. Is the preceding statement consistent with the conclusions of Modigilani and Miller's 1958 capital structure theory (MM Proposition I)? Yes No