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: Cost of store equipment $740,000 Life of store equipment 14 years Estimated residual value of store equipment $75,000 Yearly costs to operate the warehouse, excluding depreciation of store equipment $175,000 Yearly expected revenues-years 1-7 $280,000 Yearly expected revenues-years 8-14 $240,000 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 "O". For those boxes in which you m numbers use a minus sign. must enter subtracted or negative Differential Analysis Operate Warehouse (Alt. 1) or Invest in Bonds (Alt. 2) July 1 Operate Warehouse (Alternative 1) Invest in Bonds (Alternative 2) Differential Effect on Income (Altemative 2) Revenues Check My Work Operate Warehouse (Alt. 1) or Invest in Bonds (Alt. 2) July 1 Invest in Bonds (Alternative 2) Differential Effect on Income (Alternative 2) Operate Warehouse (Alternative 1) Revenues Costs: Costs to operate warehouse Cost of equipment less residual value Income (Loss) Feedback TCheck My Work Subtract the warehouse costs (14 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 14 years (principal x rate x time). Determine the differential effect of the revenues, costs, and income (loss) by subtracting alternative 2 from alternative 1. Which alternative has the most desirable e income? Learning Objective 1. 2. Based on the results disclosed by the differential analysis, should the proposal to operate the warehouse be accepted? Yes 3. If the proposal is accepted, what is the total estimated income from operations of the warehouse for the 14 years? Check My Work