Modigliani and Miller assumptions

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$\text{'}$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$\text{'}$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 paper? Check all that apply.

Complete information is readily available to all investors and is free to all market

participants.

Investors have different expectations about firms' earnings and risk.

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 borrow and lend at the

same rate of interest.

A firm's earnings will grow at an unpredictable rate.

All investors are rational, and have the same expectations of a company's earnings $($as

measured by its EBIT$).$

Consider the following statement about a firm's capital structure:

A firm's capital structure does not affect the firm's market value.

Is the preceding statement consistent with the conclusions of Modigliani and Miller's $1958$ capital

structure theory $($MM Proposition I$)?$

Yes

No