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 $150,600 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		$150,600
Life of store equipment		16 years
Estimated residual value of store equipment		$19,000
Yearly costs to operate the store, excluding
	depreciation of store equipment	$55,600
Yearly expected revenuesyears 1-8		$75,400
Yearly expected revenuesyears 9-16		$69,300

Required:

1. Prepare a differential analysis as of October 1 to determine whether to Operate Retail Store (Alternative 1) or Invest in Bonds (Alternative 2). If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

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 Effects (Alternative 2)
Revenues	$fill in the blank 42d224fa2f85f96_1	$fill in the blank 42d224fa2f85f96_2	$fill in the blank 42d224fa2f85f96_3
Costs:
Costs to operate store	fill in the blank 42d224fa2f85f96_4	fill in the blank 42d224fa2f85f96_5	fill in the blank 42d224fa2f85f96_6
Cost of equipment less residual value	fill in the blank 42d224fa2f85f96_7	fill in the blank 42d224fa2f85f96_8	fill in the blank 42d224fa2f85f96_9
Profit (loss)	$fill in the blank 42d224fa2f85f96_10	$fill in the blank 42d224fa2f85f96_11	$fill in the blank 42d224fa2f85f96_12

Feedback

Subtract the store operating costs (16 years) and the cost of the equipment less residual value from the revenues from operating the store. Determine the bond investment interest income for 16 years (principal rate time). Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 2 from alternative 1. Which alternative has the most desirable effect on income?

2. Based on the results disclosed by the differential analysis, should the proposal be accepted?

YesNoNo

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 b9a41505005a04b_2