(Solved):   Differential Analysis for a Lease-or-sell Decision Stowe Construction Company is consideri ...

 

Differential Analysis for a Lease-or-sell Decision Stowe Construction Company is considering selling excess machinery with a book value of \( \$ 25,000 \) (original cost of \( \$ 180,000 \) less accumulated depreciation of 5155,000 ) for \( \$ 35,000 \), less a \( 5 \% \) brokerage commission. Alternatively, the machinery can be leased for a total of \( \$ 48,000 \) for 4 years, after which it is expected to have no residual value. During the period of the lease, Stowe Construction Company's costs of repairs, insurance, and property tax expenses are expected to be \( \$ 12,000 \). a. Prepare a differential analysis dated March 21 to determine whether Stowe Construction Company should lease (Altemative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. b. On the basis of the data presented, would it be advisable to lease or sell the machinery?