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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
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 |
| Â | Required: |
| A. | Prepare a differential analysis as of October 1 presenting the proposed operation of the store for the 16 years (Alternative 1) as compared with investing in U.S. Treasury bonds (Alternative 2). |
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