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Differential Analysis for a Lease or Buy Decision Sloan Corporation is considering new equipment. The...

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Accounting

Differential Analysis for a Lease or Buy Decision

Sloan Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,340. The freight and installation costs for the equipment are $620. If purchased, annual repairs and maintenance are estimated to be $410 per year over the four-year useful life of the equipment. Alternatively, Sloan 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 December 3, to determine whether Sloan 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 machine user, as opposed to the machine owner.) If an amount is zero, enter "0". Use a minus sign to indicate a loss.

Differential Analysis
Lease Equipment (Alt. 1) or Buy Equipment (Alt. 2)
December 3
Lease Equipment (Alternative 1) Buy Equipment (Alternative 2) Differential Effect on Income (Alternative 2)
Revenues $ $ $
Costs:
Purchase price $ $ $
Freight and installation
Repair and maintenance (4 years)
Lease (4 years)
Income (loss) $ $ $

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