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Chapter 24 PR 24-1B eBook 1. PR.24-01B Differential Analysis Involving Opportunity Costs On July 1, Coastal Distribution Company is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $740,000 of 5% U.S. Treasury bonds that mature in 14 years. The bonds could be purchased at face value. The following data have been assembled: $740,000 Cost of store equipment Life of store equipment Estimated residual value of store equipment 14 years $75,000 Yearly costs to operate the warehouse, excluding depreciation of store equipment $175,000 Yearly expected revenues years 1-7 $280,000 Yearly expected revenues-years 8-14 $240,000 Required: 1. Prepare a differential analysis as of July 1 presenting the proposed operation of the warehouse for the 14 years (Alternative 1) as compared with investing in U.S. Treasury bonds (Alternative 2). If an amount is zero, enter "O'. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Operate Warehouse (Alt. 1) or Invest In Bonds (Alt. 2) July 1 Operate Warehouse (Alternative 1) Invest in Bonds (Alternative 2) Differential Effect on Income (Alternative 2) Revenues Costs: Costs to operate warehouse Cost of equipment less residual value Check My Work Progress: 1/1 items Assignment Score: 0.0% Email Instructor Save and Exit Submit Assignment for Grading Chapter 24 PR 24-1B 1. PR.24-01B eBook Estimated residual value of store equipment 575,000 Yearly costs to operate the warehouse, excluding depreciation of store equipment $175,000 Yearly expected revenues-years 1-7 $280.000 Yearly expected revenues-years 8-14 $240,000 Required: 1. Prepare a differential analysis as of July 1 presenting the proposed operation of the warehouse for the 14 years (Alternative 1) as compared with investing in U.S. Treasury bonds (Alternative 2). If an amount zero, enter 'O". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Operate Warehouse (Alt. 1) or Invest in Bonds (Alt. 2) July 1 Operate Warehouse (Alternative 1) Invest in Bonds (Alternative 2) $ Differential Effect on Income (Alternative 2) Revenues Costs: Costs to operate warehouse Cost of equipment less residual value Income (Loss) $ $ 2. Based on the results disclosed by the differential analysis, should the proposal to operate the warehouse be accepted? accepted, what is the total estimated income from operations of the warehouse for the 14 years? 3. If the proposal s Check My Work Progress: 1/1 items Assignment Score: 0.0% Email Instructor Save and Exit Submit Assignment for Grading

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