Edward Klar, senior accountant has established the following rules of thumb for estimating other relevant data:

Costs	30% of Sales
Accounts Receivable	30% of Sales
Inventory	25% of Sales
Cash	5% of Sales
Accounts Payable	20% of Sales

The following is the balance sheet information:

	Book Value	Coupon Rate	# of units	Maturity
Bonds	$10,000,000	6%	10,000	10 yrs.
Debentures	$20,000,000	9%	20,000	10 yrs.
Pref. Stock	$30,000,000	10%	1,000,000
Common Stock	$50,000,000	-	1,000,000
Retained Earnings	$25,000,000

Advanced Practice Problem Continued

Assume that the current price of bonds is$1000 and the current price of the debentures is $1100. The price of preferred stock is $25and the price of common stock is $50. The annual expected dividend payment is $5 and it is expected to grow by 7% per annum in perpetuity. The tax rate is 45%. Which system would you take? Determine both the NPV and IRR.