on july 1, campus 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 $1,500,000 of 2% U.S. treasury bonds that mature in 15 years. The bonds could be purchased at face value. The following data have been assembled:

 

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Cost of store equipment Life of store equipment Estimated residual value of store equipment Yearly costs to operate the store, excluding depreciation of store equipment $1,500,000 15 years $75,000 $320,000 Yearly expected revenues-years 1-6 $400,000 Yearly expected revenues-years 7-15 $600,000 Required: 1. Prepare a differential analysis as of July 1 presenting the proposed operation of the store for the 15 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 Retail Store (Alt. 1) or Invest in Bonds (Alt. 2) Line Item Description July 1 Operate Retail Store Invest in Bonds (Alternative 1) (Alternative 2) Differential Effects (Alternative 2) Revenues Costs: Costs to operate store Cost of equipment less residual value Profit (loss) Check My Work Next > Cost of store equipment Life of store equipment Estimated residual value of store equipment Yearly costs to operate the store, excluding depreciation of store equipment $1,500,000 15 years $75,000 $320,000 Yearly expected revenues-years 1-6 $400,000 Yearly expected revenues-years 7-15 $600,000 Required: 1. Prepare a differential analysis as of July 1 presenting the proposed operation of the store for the 15 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 Retail Store (Alt. 1) or Invest in Bonds (Alt. 2) Line Item Description July 1 Operate Retail Store Invest in Bonds (Alternative 1) (Alternative 2) Differential Effects (Alternative 2) Revenues Costs: Costs to operate store Cost of equipment less residual value Profit (loss) Check My Work Next >

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Answer Revenues 400000 years 1... View the full answer