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Differential Analysis Involving Opportunity Costs On July 1, Campus Stores Inc. is considering leasing a building and purchasing the necessary equipment to operate a
Differential Analysis Involving Opportunity Costs On July 1, Campus Stores Inc. is considering leasing a building and purchasing the necessary equipment to operate a retail store. Alternatively, the company could use the funds to invest in $1,500,000 of 2% U.S. Treasury bonds that mature in 15 years. The bonds could be purchased at face value. The following data have been assembled: 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 $1,500,000 15 years $75,000 $320,000 Yearly expected revenues-years 1-6 $400,000 Yearly expected revenues-years 7-15 $600,000
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