Assume a company has equipment with a book

by | Mar 18, 2020 | Uncategorized

  

Assume a company has equipment with a book value of $60,000. The Company can sell the equipment through a broker for $90,000 less a 4% commission fee. Alternatively, the Company could lease the equipment to another party for 3 years at a price of $130,000. At the end of the three years, the equipment is expected to have no residual value (book value of $0). If the equipment is leased, the Company will incur estimated expenses of $12,000 over the three years for maintenance, insurance and taxes

Calculate the differential net income and make a statement explaining why the company should lease or sell.

  

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