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 approach 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 MM used in their initial model and research paper? Check all that apply. Business risk can be measured by the standard deviation of EBIT. Investors have homogeneous expectations about earnings and risk. All cash flows are perpetuities, so EBIT will remain constant. All investors have the same expectations of a firm's earnings. Consider the following statement about a firm's capital structure: The value of the firm is independent of its leverage. Is the preceding statement consistent with the conclusions of Modigliani and Miller's capital structure theory? Yes No