i have a finance question about POLYMERPIPES LIMITED WACC

Their main product, FRP pipe, has an exceptional strength to weight ratio, and weight for weight is stronger than steel. The pipes also have good shock and impact resistance and excellent flow characteristics as a smooth glass-like interior finish reduces material build-up and improves fluid transmission. PolymerPipes is a medium sized company listed on the NZX and has 20 million shares on issue - the current share price is $2.40. In addition PolymerPipes issued 5 million preference shares about 5years ago. These preference shares have a $1 face value and a fixed dividend of 12%p.a. The preference shares are currently trading at $1.50 each. The company's equity beta (?) is 1.20, the New Zealand market risk premium is estimated at 6.0% p.a., the yield on 10-year New Zealand government bonds is 2.50% p.a., and the company tax rate is 28%. The companys long-term debt consists entirely of 15,000 10-year bonds issued exactly 4 years ago (these are listed on NZDX). Each bond has a face value of $1,000 and an annual coupon rate of 8.5% (paid semiannually). The bonds are currently trading at a yield to maturity of 5.23% p.a. Extracts from PolymerPipes latest financial statements show the following: Balance Sheet of PolymerPipes as at 31 March 2018 ($000) Current Assets 3,000 Non-Current Assets 47,000 Total Assets 50,000 Current Liabilities 1,000 Non-current Liabilities 15,000 Preference Shares 5,000 Ordinary Shares 20,000 Retained Earnings 9,000 Total L & OE 50,000 You have just received the following memo from the companys Chief Executive Office Bruno Mercury and have decided you need to prepare thoroughly for any questions that might arise from your colleagues. On first glance you are a little concerned with some of the calculations and feel you might have to talk briefly with Mr Mercury before the meeting as well. a) Prepare your own detailed calculation of PolymerPipes WACC. (Round your answer up to the nearest %) b) Clearly identify all parts of your calculations that differ from Mr. Mercurys and thoroughly explain/justify your assumptions and calculations.

and here is workings for Mr.Mercury

Our target rate of return on equity has been 14% for many years. I realise that many new employees feel that this target is too high but I feel we need to aim for the highest profitability we can in order to keep our shareholders as happy as possible. The following table summarises the composition of PolymerPipes financing: Amount ($000) % of total Rate of return Bonds 15,000 37.5% 8.5% Preference Shares 5,000 12.5% 12.0% Ordinary Shares 20,000 50.0% 14.0% From this data I have estimated PolymerPipes weighted average cost of capital as: WACC = (0.375 x 0.085) + (0.125 x 0.12) + (0.50 x 0.14) = 0.1168 or 12% Therefore the official hurdle rate for this and all future CAPEX decisions is 12%. If you have any further questions about these calculations please direct those to our new project finance manager who has just graduated with a degree in finance and is more than qualified to explain things to you.