Your company is thinking about purchasing a small, successful business.You have two choices: Small Business A or Small Business B. The purchase price of each business is $250,000 (and you cannot spend more than that, so acquiring both is not an option).

Reviewthe following data

Small Business A:

Revenue =$100,000 in year one, increasing by 10% each year.

Expenses = $20,000 in year one, increasing by 15% each year.

Depreciation Expense = $5,000 each year.

Tax Rate = 25%

Discount Rate = 10%

Small Business B:

Revenue =$150,000 in year one, increasing by 8% each year.

Expenses = $60,000 in year one, increasing by 10% each year

Depreciation Expense = $10,000 each year

Tax Rate = 25%

Discount Rate = 11%

One possible valuation method that could work is Net Present Value, which involves bringing the future cash flows (profits in this case) back to today's dollars (Present Value) using the Discount Rate and then adding this number to the purchase price (often listed as a negative number since this is cash going out) and seeing which business has the greater value. Forecasting the profits out for five years should be sufficient.

Could you please give me the NPV of each showing me the steps in figuring this out?