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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
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: 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 " 0 ". If required, use a minus sign to indicate a loss. Differential Analysis Operate Warehouse (Alt. 1) or Invest in Bonds (Alt. 2) 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 " 0 ". If required, use a minus sign to indicate a loss. 2. Based on the results disclosed by the differential analysis, should the proposal be accepted? 3. If the proposal is accepted, what is the total estimated operating income of the warehouse for the 14 years? $
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