Question
Stumblebum Company owns equipment with a cost of $830,000 and accumulated depreciation of $730,000 dollars that can be sold for $400,000 (less a 4% sales
Stumblebum Company owns equipment with a cost of $830,000 and accumulated depreciation of $730,000 dollars that can be sold for $400,000 (less a 4% sales commission). Alternatively, the company can lease the equipment for 4 years and receive a total a $400,000 in revenue for the life of the lease. There is no residual value. In addition, expenses incurred by the company on the leased equipment would total $40,000 over the four years. Based on your differential analysis, what is the difference in the two alternatives and should the company lease the equipment or sell it?
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