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Business A has no debt, has zero growth, expected earnings before interest and taxes of €...

Business A has no debt, has zero growth, expected earnings before interest and taxes of € 2 million and a business tax rate of 35%. The cost of equity is 10% and the current value of the business is € 26.5 million. The business is considering a loan financing case:
A) What is the optimal level of lending according to Modigliani's and Miller's theories of business taxation? (assuming there is no cost of financial difficulties)
B) What is the total value if using a loan of € 21,000,000?

The exercise does not provide cost of debt.

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