Differential Analysis for a Lease or Buy Decision Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,060. The freight and installation costs for the equipment are $620. If purchased, annual repairs and maintenance are estimated to be $430 per year over the four-year useful life of the equipment. Alternatively, Laredo Corporation can lease the equipment from a domestic supplier for $1,360 per year for four years, with no additional costs. Prepare a differential analysis dated March 15 to determine whether Laredo Corporation 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 "0", Costs: Differential Analysis Lease (Alt. 1) or Buy (Alt. 2) Equipment March 15 Purchase price Freight and installation Repair and maintenance (4 years) Lease (4 years) Total costs Lease Buy Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Equipment Equipment Determine whether Laredo should lease (Alternative 1) or buy (Alternative 2) the equipment.
Differential Analysis for a Lease or Buy Decision Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,060. The freight and installation costs for the equipment are $620. If purchased, annual repairs and maintenance are estimated to be $430 per year over the four-year useful life of the equipment. Alternatively, Laredo Corporation can lease the equipment from a domestic supplier for $1,360 per year for four years, with no additional costs. Prepare a differential analysis dated March 15 to determine whether Laredo Corporation 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 "0", Costs: Differential Analysis Lease (Alt. 1) or Buy (Alt. 2) Equipment March 15 Purchase price Freight and installation Repair and maintenance (4 years) Lease (4 years) Total costs Lease Buy Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Equipment Equipment Determine whether Laredo should lease (Alternative 1) or buy (Alternative 2) the equipment.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Differential Analysis for a Lease or Buy Decision
Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,060. The freight and installation costs for the
equipment are $620. If purchased, annual repairs and maintenance are estimated to be $430 per year over the four-year useful life of the equipment. Alternatively,
Laredo Corporation can lease the equipment from a domestic supplier for $1,360 per year for four years, with no additional costs.
Prepare a differential analysis dated March 15 to determine whether Laredo Corporation 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
"0",
Costs:
Differential Analysis
Lease (Alt. 1) or Buy (Alt. 2) Equipment
March 15
Purchase price
Freight and installation
Repair and maintenance (4 years)
Lease (4 years)
Total costs
Lease
Buy
Equipment
(Alternative 1) (Alternative 2) (Alternative 2)
Differential
Effects
Equipment
Determine whether Laredo should lease (Alternative 1) or buy (Alternative 2) the equipment.
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