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PR25-1A Differential analysis involving opportunity costs OBJ.1 PR 25-1A...

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Accounting

PR25-1A Differential analysis involving opportunity costs

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OBJ.1 PR 25-1A Differential analysis involving opportunity costs On October 1, White Way Stores Inc. is considering leasing a building and purchasing the necessary equipment to operate a retail store. Alternatively, the company could us the funds to invest in $180,000 of 6% U.S. Treasury bonds that mature in 16 years. The bonds could be purchased at face value. The following data have been assembled: $180,000 16 years $15,000 Cost of store equipment Life of store equipment Estimated residual value of store equipment Yearly costs to operate the store, excluding depreciation of store equipment Yearly expected revenues-years 1-8 Yearly expected revenues--years 9-16 $58,000 $85,000 $73,000 Instructions 1. Prepare a differential analysis as of October 1 presenting the proposed operation of the store for the 16 years (Alternative 1) as compared with investing in U.S. Treasury bonds (Alternative 2). 2. Based on the results disclosed by the differential analysis, should the proposal be

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