1.2

Differential Analysis for a Lease-or-sell Decision Stowe Construction Company is considering selling excess machinery with a book value of $277,700 (original cost of 5398,000 less accumulated depreciation of $120,300 ) for $277,000, less a 5% brokerage commission. Aiternatively, the machinery can be leased for a total of 5287,700 for 5 years, after which it is expected to have no residual value. During the period of the lease, Stowe Construction Company's costs of repairs, insurance; and property tax expenses are expected to be $24,900. a. Prepare a differential analysis dated March 21 to determine whether Stowe Construction Company should lease (Alternative 1) or seli (Alternative 2) the machinery. required, use a minus sign to indicate a loss, Moffett Industries is considering new equipment. The equipment can be purchased from an overseas supplier for $3,360, The frelght and installation costs for the equipment are $630. If purchased, annual repairs and maintenance are estimated to be $400 per year over the 4 -year useful life of the equipment. Alternatively, Moffe Industries can lease the equipment from a domestic supplier for $1,440 per year for 4 years, with no additional costs. a. Prepare a differentiai analysis dated February 12 to determine whether Moffett Industries should lease (Aternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a "lease or buy" decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) if an amount is zero