Question

Question

Differential Analysis for a Lease-or-Buy Decision Gilroy Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,240. The freight and installation costs for the equipment are $640. If purchased, annual repairs and maintenance are estimated to be $380 per year over the four-year useful life of the equipment. Alternatively, Gilroy can lease the equipment from a domestic supplier for $1,540 per year for four years, with no additional costs. Prepare a differential analysis dated December 11 to determine whether Gilroy 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 Lease Machine Buy Machine (Alternative 1) (Alternative 2) Differential Effect on Income (Alternative 2) $0 Revenues $0 $0 Costs: Purchase price Freight and installation Repair and maintenance (4 years) Lease (4 years) Income (Loss) Determine whether Gilroy should lease (Alternative 1) or buy (Alternative 2) the equipment