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Differential Analysis for a Lease-or-Buy Decision Urban Styles Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,000. The
Differential Analysis for a Lease-or-Buy Decision Urban Styles Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,000. The freight and Installation costs for the equipment are 5630. If purchased, annual repairs and maintenance are estimated to be $390 per year over the four-year useful life of the equipment. Alternatively, Urban Styles can lease the equipment from a domestic supplier for $1,600 per year for four years, with no additional costs. Prepare a differential analysis dated December 11 to determine whether Urban Styles 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 owner.) If an amount is zero, enter *o". Differential Analysis Lease Machine (Alt. 1) or Buy Machine (Alt. 2) December 11 Differential Effect Lease Machine Buy Machine on Income (Alternative 1) (Alternative 2) (Alternative 2) 30 $0 SO Revenues Costs: Purchase price Freight and Installation Repair and maintenance (4 years) Lease (4 years) Income (Loss)
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