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Differential Analysis for a Lease or Buy Decision

Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,200. The freight and installation costs for the equipment are $640. If purchased, annual repairs and maintenance are estimated to be $420 per year over the four-year useful life of the equipment. Alternatively, Laredo Corporation can lease the equipment from a domestic supplier for $1,460 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 owner.) If an amount is zero, enter "0".

Differential Analysis
Lease (Alt. 1) or Buy (Alt. 2) Equipment
March 15
	Lease Equipment (Alternative 1)	Buy Equipment (Alternative 2)	Differential Effects (Alternative 2)
Costs:
Purchase price	$fill in the blank 61b6effb3fdafef_1	$fill in the blank 61b6effb3fdafef_2	$fill in the blank 61b6effb3fdafef_3
Freight and installation	fill in the blank 61b6effb3fdafef_4	fill in the blank 61b6effb3fdafef_5	fill in the blank 61b6effb3fdafef_6
Repair and maintenance (4 years)	fill in the blank 61b6effb3fdafef_7	fill in the blank 61b6effb3fdafef_8	fill in the blank 61b6effb3fdafef_9
Lease (4 years)	fill in the blank 61b6effb3fdafef_10	fill in the blank 61b6effb3fdafef_11	fill in the blank 61b6effb3fdafef_12
Total costs	$fill in the blank 61b6effb3fdafef_13	$fill in the blank 61b6effb3fdafef_14	$fill in the blank 61b6effb3fdafef_15