Differential Analysis for a Lease or Buy Decision

Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $$3,160.$ The freight and installation cost for the equipment are $$600.$ If purchased, annual repairs and maintenance are estimated to be $$410$ per year over the four$-$year useful life of the equipme Alternatively, Laredo Corporation can lease the equipment from a domestic supplier for $$1,580$ per year for four years, with no additional costs.

Prepare a differential analysis dated March $15$ to determine whether Laredo Corporation should lease $($Alternative $1)$ 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 own If an amount is zero, enter $"0".$

Differentlal Analysis

Lease $($AIt$.1)$ or Buy $($Alt$.2)$ Equlpment

March $15$

$\backslash$table$[[$Lease$,$Buy,Differential$],[$Equipment$,$Equipment,Effects$],[($Alternative $1),($Alternative $2),($Alternative $2)]]$

Costs:

Purchase price

s $$

$$ $ $$

$$

Freight and installation $$

$$

$$

Repair and maintenance $(4$ years$)$

$$

$$

Lease $(4$ years$)q,$

Total costs $q,$

$q,$

$q,$

: $q,$

Determine whether Laredo should lease $($Alternative $1)$ or buy $($Alternative $2)$ the equipment.