On July 1, Coastal Distribution Company is considering leasing a building and buying the necessary equipment to
Question:
Cost of equipment ................$ 740,000
Life of equipment ................ 14 years
Estimated residual value of equipment ........ $ 75,000
Yearly costs to operate the warehouse, excluding
depreciation of equipment .............$ 175,000
Yearly expected revenues—years 1– 7 .......$ 280,000
Yearly expected revenues—years 8– 14 .......$ 240,000
Instructions
1. Prepare a differential analysis as of July 1, 2014, presenting the proposed operation of the warehouse for the 14 years (Alternative 1) as compared with investing in U. S. Treasury bonds (Alternative 2).
2. Based on the results disclosed by the differential analysis, should the proposal be accepted?
3. If the proposal is accepted, what is the total estimated income from operations of the warehouse for the 14 years?
Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
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Related Book For
Financial And Managerial Accounting
ISBN: 9781337119207
14th Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
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