Perfect competition in product and securities markets. Among other things, this imply that all producers and consumers are price takers. There is no cost to bankruptcy. Firms issue risky debt and equity, and have the same beta b risk. Allowing for proportional corporate tax eases the no-tax assumption above.
Homemade leverage is a perfect substitute for corporate leverage.
Investors are risk averse individuals. Asset returns are distributed by the normal distribution. These were the assumptions. That is, the risk that can t be diversified away. That is, revenues less variable and fixed cash expenses from operations and less deprecations.