Differential Analysis Operate Warehouse (Alt. 1) or Invest in Bonds (Alt. 2) July 1 Operate Warehouse Invest in Bonds Differential Effect on Income (Alternative 1) (Alternative 2) (Alternative 2) 1,157,600 X 143,712.00 1,013,088.00 X Revenues Costs: 908,800.X 0 908,800.00 X Costs to operate warehouse Cost of equipment less residual value 131,000.00 0 -133,100.00 X 117,300.00 X 143,712.00 26,712.00 X Income (Loss) Feedback Check Work Subtract the warehouse costs (16 years) and the cost of the equipment less the residual value from the revenues from operating the warehouse. Determine the bond investment interest Income for 16 years (principal x rate x time). Determine the differential On July 1, Midway 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 $149,700 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 $149,700 Life of store equipment 16 years Estimated residual value of store equipment $18,700 Yearly costs to operate the warehouse, excluding depreciation of equipment depreciation of store equipment $55,600 Yearly expected revenues-years 1-8 74,500 Yearly expected revenues-years 9-16 70,000 Required: 1. Prepare a differential analysis as of July 1 presenting the proposed operation of the warehouse for the 16 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