Present value

DEAR SIR, I WOULD LIKE TO SEEK UNDERSTANDING ON , Mrs.Glam wants to expand her clothes shop. Mrs Glam has commissioned a market research company at a cost of $3000 to reseach her options for her. The company have offered two options: Option 1 Remain in her the current premises and undertake an advertising campaign at cost of $2000 to increase the profile of the shop in the area.It is estimated that revenue will increase by 10% from its current level of $50000 per year. The contribution earned on revenue is 30%. Option 2 Move the shop to a more central location and undertake an advertising campaign to both increase the profile and the move to new premises. This more extensive campaign would cost $4000 but revenue would be expected to increase by 18% from its current level. The level of contribution earned or revenue is not expected to change. There would be further costs involved in moving location which have been estimated: *Moving costs are estimated to be $1500.This includes the cost of refitting the shop and would be payable immediately *New shop fittings will be required costing $2500.These will be depreciated on a straight line basis . *Rates of $4000 will be payable yearly in advance.This cost is 15% higher than Mrs Glam currently pays,due to the location. Other information *Mrs Glam uses a cost of capital of 10% *The expansion is to have a life of 4 years . 1.Calculate the present value of the INCREMENTAL contribution cash flow that will arise if option 2 is compared to option 1. 2.Calculate the present value of the cash flow relating to the INCREMENTAL rates that will arise if option 2 compared to option 1. THANK YOU.