Urban Styles 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 $430 per year over the four-year useful life of the machine. Alternatively, Urban Styles can lease the machine from a domestic supplier for $1,400 per year for four years, with no additional costs.

Prepare a differential analysis dated October 3, 2012, to determine whether Urban Styles should lease (Alternative 1) or purchase (Alternative 2) the machine. (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 zero "0".

Differential Analysis
Lease Machine (Alt. 1) or Buy Machine (Alt. 2)
October 3, 2012
		Lease Machine (Alternative 1)		Buy Machine (Alternative 2)		Differential Effect on Income (Alternative 2)
Costs:
Purchase price		$		$		$
Freight and installation
Repair and maintenance (4 years)
Lease (4 years)
Income (Loss)