PPG Industries has a firm value of $30 billion. Its has 200 million shares outstanding and an equity book value of $23 per share. Its latest stock price is $116. Its beta on the market factor is 1.58, its beta on the Fama-French size factor is -0.3, and its beta on the Fama-French book-to-market factor is 0.2. The expected market risk premium is 7.7%, the expected risk premium on the size factor is 3.5% and the expected risk premium on the book-to-market factor is 4.8%. The risk-free rate is 2% and the corporate tax rate is 21%. PPG's bonds were recently issued and have a current price of $975, provide an annual coupon of 6.5%, and mature in 12 years. The face value of the bonds is $1,000.
(a) What is the WACC for PPG Industries?
(b) PPG's equity book value just increased to $28 per share, while its stock price declined to $110. Its firm value decreased to $29 billion, and the current price of PPG's bonds are now $1,100. Recalculate the WACC for PPG Industries. Assume the coupon, maturity and face value of its bonds remain the same.