Inman Industries is considering selling excess machinery with a book value of $279,700 (original cost of $399,400 less accumulated depreciation of $119,700) for $276,200 less a 6% brokerage commission. Alternatively, the machinery can be leased for a total of $286,900 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Industries' costs of repairs, insurance, and property tax expenses are expected to be $25,400. a. Prepare a differential analysis report for the lease or sell decision. INMAN INDUSTRIES Proposal to Lease or Sell Machinery Differential Analysis Report Differential revenue from alternatives: Revenue from lease v Proceeds from sale v Differential revenue from lease v Differential cost of alternatives: Repairs, Insurance, and property tax expenses from lease v Commission on sale v Differential cost of lease v Net differential gain from lease alternative v

Inman Industries is considering selling excess machinery with a book value of $279,700 (original cost of $399,400 less accumulated depreciation of $119,700) for $276,200 less a 6% brokerage commission. Alternatively, the machinery can be leased for a total of $286,900 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Industries' costs of repairs, insurance, and property tax expenses are expected to be $25,400. a. Prepare a differential analysis report for the lease or sell decision. INMAN INDUSTRIES Proposal to Lease or Sell Machinery Differential Analysis Report Differential revenue from alternatives: Revenue from lease v Proceeds from sale v Differential revenue from lease v Differential cost of alternatives: Repairs, Insurance, and property tax expenses from lease v Commission on sale v Differential cost of lease v Net differential gain from lease alternative v

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 6P

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