Print Item Differential analysis involving opportunity costs 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 i funds to invest in $151,300 of 6% 0.5. Treasury bonds that mature in 16 years. The bonds could be purchased at face value. The following data have been assembled Cost of equipment Life of equipment Estimated residual value of equipment $151,300 16 years $16,800 Yearly costs to operate the warehouse, excluding $56,300 75,300 69,000 depreciation of equipment Yearly expected revenues--years 1-8 Yearly expected revenues-years 9-16 Required: 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) Operate Warehouse Invest in Bonds July 1 (Alternative 1) 1.204000x (Alternative 2) Differential Effects (Alternative 2) 942400 X 202320 X Line Item Description Revenues Costs: Costs to operate warehouse 096000 X 0 896800 X Cost of equipment less residual value 132.500 0 132.500 Profit (Loss) +440500 X 942400 X 501980 X 2. Based on the results disclosed by the differential analysis, should the proposal be accepted? Yes x 3. If the proposal is accepted, what is the total estimated operating income of the warehouse for 16 years? Check My Work 0 more Check My Work uses remaining Next