< Differential Analysis for a Lease-or-buy Decision Moffett Industries is considering new equipment. The equipment can be purchased from an overseas supplier for $3,160. The freight and installation costs for the equipment are $640. If purchased, annual repairs and maintenance are estimated to be $390 per year over the 4- year useful life of the equipment. Alternatively, Moffett Industries can lease the equipment from a domestic supplier for $1,600 per year for 4 years, with no additional costs. a. Prepare a differential analysis dated February 12 to determine whether Moffett Industries 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". Differential Analysis Lease (Alt. 1) or Buy (Alt. 2) Equipment February 12 Line Item Description Costs: Purchase price Freight and installation Repair and maintenance (4 years) Lease (4 years) Total costs Lease Equipment Buy Equipment Differential Effects (Alternative 1) (Alternative 2) (Alternative 2)
< Differential Analysis for a Lease-or-buy Decision Moffett Industries is considering new equipment. The equipment can be purchased from an overseas supplier for $3,160. The freight and installation costs for the equipment are $640. If purchased, annual repairs and maintenance are estimated to be $390 per year over the 4- year useful life of the equipment. Alternatively, Moffett Industries can lease the equipment from a domestic supplier for $1,600 per year for 4 years, with no additional costs. a. Prepare a differential analysis dated February 12 to determine whether Moffett Industries 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". Differential Analysis Lease (Alt. 1) or Buy (Alt. 2) Equipment February 12 Line Item Description Costs: Purchase price Freight and installation Repair and maintenance (4 years) Lease (4 years) Total costs Lease Equipment Buy Equipment Differential Effects (Alternative 1) (Alternative 2) (Alternative 2)
Chapter1: Financial Statements And Business Decisions
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Differential Analysis for a Lease-or-buy Decision
Moffett Industries is considering new equipment. The equipment can be purchased from an overseas supplier for $3,160. The freight and
installation costs for the equipment are $640. If purchased, annual repairs and maintenance are estimated to be $390 per year over the 4-
year useful life of the equipment. Alternatively, Moffett Industries can lease the equipment from a domestic supplier for $1,600 per year for 4
years, with no additional costs.
a. Prepare a differential analysis dated February 12 to determine whether Moffett Industries 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".
Differential Analysis
Lease (Alt. 1) or Buy (Alt. 2) Equipment
February 12
Line Item Description
Costs:
Purchase price
Freight and installation
Repair and maintenance (4 years)
Lease (4 years)
Total costs
Lease
Equipment
Buy
Equipment
Differential
Effects
(Alternative 1) (Alternative 2) (Alternative 2)
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