Differential Analysis Involving Opportunity Costs

On October 1, Matrix 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 $151,300 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:

Cost of store equipment		$151,300
Life of store equipment		16 years
Estimated residual value of store equipment		$18,400
Yearly costs to operate the store, excluding
	depreciation of store equipment	$56,600
Yearly expected revenuesyears 1-8		$74,900
Yearly expected revenuesyears 9-16		$69,600

Required:

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). If an amount is zero, enter zero "0".

Differential Analysis
Operate Retail Store (Alt. 1) or Invest in Bonds (Alt. 2)
October 1
	Operate Retail Store (Alternative 1)	Invest in Bonds (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$fill in the blank ad46ae0b7f88fdb_1	$fill in the blank ad46ae0b7f88fdb_2	$fill in the blank ad46ae0b7f88fdb_3
Costs:
Costs to operate store	fill in the blank ad46ae0b7f88fdb_4	fill in the blank ad46ae0b7f88fdb_5	fill in the blank ad46ae0b7f88fdb_6
Cost of equipment less residual value	fill in the blank ad46ae0b7f88fdb_7	fill in the blank ad46ae0b7f88fdb_8	fill in the blank ad46ae0b7f88fdb_9
Income (Loss)	$fill in the blank ad46ae0b7f88fdb_10	$fill in the blank ad46ae0b7f88fdb_11	$fill in the blank ad46ae0b7f88fdb_12

2. Based on the results disclosed by the differential analysis, should the proposal to operate a retail store be accepted?

3. If the proposal is accepted, what would be the total estimated income from operations of the store for the 16 years? $fill in the blank 6df649faa029006_2