The proposition on the irrelevance of capital structure. In modern terms, capital structure is irrelevant, and firm value is equal to the present value of the free cash flow discounted at the relevant cost of capital. 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.