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Differential Analysis

Revenues	1264000	172800
Cost to operate retail store (enter all cost as negative amount)			(enter costs and expenses saved as positives)
Cost of equipment less residual value
Incoome (loss)		172800

2. Would the proposal to operate the retail store be accepted or rejected and why?

Estimated Income from Operations

Total estimated revenue from operating store		1264000
Total Estimated expenses to operate store	9228000
Cost to operate store exclusing depreciation	165000
Cost of store equipment less residual value		1093000
Total estimated income from operating store		171000

PR 25-1A Differential analysis involving opportunity costs OBJ. 1 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 use 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 Cost of store equipment 16 years Life of store equipment Estimated residual value of store equipment $15,000 Yearly costs to operate the store, excluding $58,000 depreciation of store equipment $85,000 Yearly expected revenues-years 1-8 $73,000 Yearly expected revenues-years 9-16 Instructions proposed of 1. Prepare a differential analysis as of October 1 presenting the operation the store for the 16 years CAlternative i) 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 accepted? total estimated income from operations 3. If the proposal is accepted, what would be the of the store for the 16 years