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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

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: Cost of store equipment $180,000 Life of store equipment 16 years Estimated residual value of store equipment $15,000 Yearly costs to operate the store, excluding depreciation of store equipment $58,000 Yearly expected revenuesyears 18 $85,000 Yearly expected revenuesyears 916 $73,000

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Score: 43/71 Differential Analysis Operate Retail Store (Alternative 1) or Invest in Bonds (Alternative 2) October 1 Operate Retail Differential Effect Invest in Bonds Store Alternative 1 (Alternative 2) $1,264,000.00 on Income (Alternative 2) $172800.00 3 Revenues 4 Costs: 5 Costs to operate store 6 Cost of equipment less residual value 7 Income (loss) 0.00 0.00 $172800.00

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