Which of the following is not an assumption in Miller and Modigliani approach?

The Miller and Modigliani (M&M) approach is a foundational theory in financial management related to capital structure and firm valuation.

According to the original M&M proposition (without taxes), several assumptions are made to simplify the model and focus purely on capital structure.

Key assumptions include:

1. There are no corporate or personal income taxes.

2. Investors are rational and aim to maximize their wealth.

3. Capital markets are perfect — meaning there are no transaction costs, information is freely available, and securities are infinitely divisible.

4. The firm’s investment policy is fixed and known to all investors.

Option C states: "There is no corporate tax though there are personal income tax" — this violates the original M&M assumption where both corporate and personal income taxes are assumed to be absent.

Therefore, Option C is not an assumption of the Miller and Modigliani approach and is the correct answer.