Lease or Sell

Assume a company has equipment with a book value of $$100,000($cost of $$140$K less A$/$D of $$40$K$).$ The Company can sell the equipment through a broker for $$100,000$ less a $10\%$ commission fee. Alternatively, the Company could lease the equipment to another party for $7$ years at a price of $$150,000.$ At the end of the seven years, the equipment is expected to have no residual value $($book value of $$0).$ If the equipment is leased, the Company will incur estimated expenses of $$10,000$ every year for the next seven years for maintenance, insurance and taxes.

Should the company lease or sell and why?

Lease Sell

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Net Income