The Walt Disney Company (NYSE: DIS) has debt of a par value of $13 billion and is currently traded at 98.5% of the par value. The appropriate cost of debt for Disney is 2.5%, whereas the Treasury rate is 2%. Disney's current stock price is $97 per share, and the company has 1.625 billion shares outstanding. Its equity beta is 1.1, and the expected return on the equity market is 8%. Disney has a 35% effective corporate tax rate.

1. What is Disney's current weighted average cost of capital (WACC)?
2. Suppose that Disney borrows more debt to repurchase stock. This results in a new debt-to-value ratio of 20% based on market value. Also, suppose this change in capital structure increases Disney's debt beta to 0.15. What is the firm's new WACC?