Opportunity Cost: Opportunity cost refers to the forgone revenue which could have been generated through an alternative use of the assets. Differential Analysis: Differential analysis refers to the analysis of differential revenue that could be gained or differential cost that could be incurred from the available alternative options of business To Prepare: The differential analysis of Company CD as on July 1, for given alternatives.

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Differential Analysis Involving Opportunity Costs On July 1, Midway Distribution Company is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $148,600 of 5% 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 $148,600 Life of store equipment 16 years Estimated residual value of store equipment $17,400 Yearly costs to operate the warehouse, excluding depreciation of equipment depreciation of store equipment $56,900 Yearly expected revenues—years 1-8 75,300 Yearly expected revenues—years 9-16 69,100 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". For those boxes…

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Question

Chapter 25, Problem 25.1BPR

a)

To determine

Opportunity Cost: Opportunity cost refers to the forgone revenue which could have been generated through an alternative use of the assets.

Differential Analysis: Differential analysis refers to the analysis of differential revenue that could be gained or differential cost that could be incurred from the available alternative options of business

To Prepare: The differential analysis of Company CD as on July 1, for given alternatives.

b)

To determine

To Deicide: The proposal to be accepted on the basis of differential analysis.

c)

To determine

To Calculate: The total estimated income from the operation of warehouse for 14 years.

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Differential Analysis Involving Opportunity Costs On July 1, Midway Distribution Company is considering leasing a building and buying the necessary equipment to operate a public warehouse. Alternatively, the company could use the funds to invest in $148,600 of 5% 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 $148,600 Life of store equipment 16 years Estimated residual value of store equipment $17,400 Yearly costs to operate the warehouse, excluding depreciation of equipment depreciation of store equipment $56,900 Yearly expected revenues—years 1-8 75,300 Yearly expected revenues—years 9-16 69,100 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". For those boxes…

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 funds to invest in $148,600 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 $148,600 Life of store equipment 16 years Estimated residual value of store equipment $18,300 Yearly costs to operate the warehouse, excluding depreciation of equipment $55,900 Yearly expected revenues—years 1-8 75,300 Yearly expected revenues—years 9-16 69,800 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 Involving Opportunity CostsOn July 1, Coastal Distribution Company is considering leasing a building and buying the necessaryequipment to operate a public warehouse. Alternatively, the company could use the funds to invest in$740,000 of 5% U.S. Treasury bonds that mature in 14 years. The bonds could be purchased at face value.The following data have been assembled:Cost of store equipment $740,000Life of store equipment 14 yearsEstimated residual value of store equipment $75,000Yearly costs to operate the warehouse, excludingdepreciation of store equipment $175,000Yearly expected revenues—years 1-7 $280,000Yearly expected revenues—years 8-14 $240,000Required:1. Prepare a differential analysis as of July 1 presenting the proposed operation of the warehouse for the14 years (Alternative 1) as compared with investing in U.S. Treasury bonds (Alternative 2). If an amount iszero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a…