Question - Lease or Sell
Casper Company owns a machine with a cost of $368,000 and accumulated depreciation of $56,500 that can be sold for $276,500, less a 3% sales commission. Alternatively, the machine can be leased by Casper Company for three years for a total of $285,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Casper Company on the machine would total $16,900 over the three years.
Prepare a differential analysis on January 12, 2014, as to whether Casper Company should lease (Alternative 1) or sell (Alternative 2) the machine.