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 $550,000 and accumulated depreciation of $350,000 that can be sold for $330,000, less a 4% sales commission. Alternatively, Plymouth Company can lease the equipment for four years for a total of $400,000, 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 $35,000 over the four-year lease. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.     Open spreadsheet   Prepare a differential analysis on August 7 as to whether Plymouth Company should lease (Alternative 1) or sell (Alternative 2) the equipment. Use a minus sign to indicate costs or negative differential effect on income. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Equipment August 7     Lease…

Lease versus Buy Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply:   The machinery falls into the MACRS 3-year class. (The depreciation rates for Year 1 through Year 4 are equal to 0.3333, 0.4445, 0.1481, and 0.0741.) Under either the lease or the purchase, Big Sky must pay for insurance, property taxes, and maintenance. The firm's tax rate is 25%. The loan would have an interest rate of 13%. It would be nonamortizing, with only interest paid at the end of each year for four years and the principal repaid at Year 4. The lease terms call for $410,000 payments at the end of each of the next 4 years. Big Sky Mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of $250,000 at the end of the 4th year.   What is the cost of owning? Enter your answer as a positive…

An asset costs $640,000 and will be depreciated in a straight-line manner over its four-year life. It will have no salvage value. The lessor can borrow at 6 percent and the lessee can borrow at 6 percent. If the lessor is in the 20 percent tax bracket and the lessee pays no taxes. For what range of lease payments does the lease have a positive NPV for both parties? Between $184,561 and $184,699 Between $179,650 and $184,699 Between $179,650 and $184,561 The range does not exist