Business, 02.04.2020 03:18 jimmy8816

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 revenues - years 1-8 $85,000 yearly expected revenues - years 9-16 $73,000

Required:

1. prepare a differential analysis as of October 1 2014 presenting the proposed operation of the store for the 16 years (alternative 1) as compared with investing in us treasury bonds (alternative 2)

2. based on the results disclosed by the differential analysis should the proposal be accespted?

3. if the proposal is accepted what would be the total estimated income from operations of the store for the 16 years?

Answers: 3

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