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 $$150,500$ of $5\%$ 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 $$150,500$

Life of store equipment $16$ years

Estimated residual value of store equipment $$17,000$

Yearly costs to operate the warehouse, excluding depreciation of equipment $$55,900$

Yearly expected revenues$$years $1-874,000$

Yearly expected revenues$$years $9-1669,200$

Required:

Question Content Area

$1.$ 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 $"0".$ If required, use a minus sign to indicate a loss.

Differential Analysis

Operate Warehouse $($Alt$.1)$ or Invest in Bonds $($Alt$.2)$

July $1$

Operate

Warehouse

$($Alternative $1)$ Invest in

Bonds

$($Alternative $2)$ Differential

Effects

$($Alternative $2)$

Revenues $fill in the blank ce$33$ba$000$fff$04$a$\_1$

$fill in the blank ce$33$ba$000$fff$04$a$\_2$

$fill in the blank ce$33$ba$000$fff$04$a$\_3$

Costs:

Costs to operate warehouse fill in the blank ce$33$ba$000$fff$04$a$\_4$

fill in the blank ce$33$ba$000$fff$04$a$\_5$

fill in the blank ce$33$ba$000$fff$04$a$\_6$

Cost of equipment less residual value fill in the blank ce$33$ba$000$fff$04$a$\_7$

fill in the blank ce$33$ba$000$fff$04$a$\_8$

fill in the blank ce$33$ba$000$fff$04$a$\_9$

Profit $($Loss$)$ $fill in the blank ce$33$ba$000$fff$04$a$\_10$

$fill in the blank ce$33$ba$000$fff$04$a$\_11$

$fill in the blank ce$33$ba$000$fff$04$a$\_12$

Question Content Area

$2.$ 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 $16$ years?

$fill in the blank fca$020$fcbfe$2$f$9$b$\_2$