Lease or sell Plymouth Company owns equipment with a cost of $600,000 andaccumulated depreciation of $375,000 that can be sold for $300,000, lessa 4% sales commission. Alternatively, Plymouth Company can lease theequipment for four years for a total of $320,000, at the end of which thereis no residual value. In addition, the repair, insurance, and property taxexpense that would be incurred by Plymouth Company on theequipment would total $40.000 over the four-year-lease. Prepare adiffrential analysis on August 7 as to whether Plymouth Companyshould lease (Alternative 1) or sell (Alternative 2) the equipment.
Lease or sell Plymouth Company owns equipment with a cost of $600,000 andaccumulated depreciation of $375,000 that can be sold for $300,000, lessa 4% sales commission. Alternatively, Plymouth Company can lease theequipment for four years for a total of $320,000, at the end of which thereis no residual value. In addition, the repair, insurance, and property taxexpense that would be incurred by Plymouth Company on theequipment would total $40.000 over the four-year-lease. Prepare adiffrential analysis on August 7 as to whether Plymouth Companyshould lease (Alternative 1) or sell (Alternative 2) the equipment.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Lease or sell
Plymouth Company owns equipment with a cost of $600,000 and
accumulated
a 4% sales commission. Alternatively, Plymouth Company can lease the
equipment for four years for a total of $320,000, at the end of which there
is no residual value. In addition, the repair, insurance, and property tax
expense that would be incurred by Plymouth Company on the
equipment would total $40.000 over the four-year-lease. Prepare a
diffrential analysis on August 7 as to whether Plymouth Company
should lease (Alternative 1) or sell (Alternative 2) the equipment.
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