Lease or Sell

Astro Company owns equipment with a cost of $366,200 and accumulated depreciation of $56,500 that can be sold for $277,400, less a 3% sales commission. Alternatively, Astro Company can lease the equipment for three years for a total of $287,900, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Astro Company on the equipment would total $14,900 over the three year lease.

a. Prepare a differential analysis on February 18, as to whether Astro Company should lease (Alternative 1) or sell (Alternative 2) the equipment.

Differential Analysis
Lease (Alt. 1) or Sell (Alt. 2) Equipment
February 18
	Lease Equipment (Alternative 1)	Sell Equipment (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$	$	$
Costs
Income (Loss)	$	$	$

b. Should Astro Company lease (Alternative 1) or sell (Alternative 2) the equipment?