Differential Analysis for a Lease$-$or$-$Buy Decision

Gilroy Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $$3,200.$ The freight and installation costs for the equipment are $$650.$ If purchased, annual repairs and maintenance are estimated to be $$430$ per year over the $4-$year useful life of the equipment. Alternatively, Gilroy can lease the equipment from a domestic supplier for $$1,580$ per year for $4$ years, with no additional costs.

Prepare a differential analysis dated December $11$ to determine whether Gilroy should Lease Equipment $($Alternative $1)$ or Buy Equipment $($Alternative $2).$ 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 $"0".$ For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis

Lease Equipment $($Alt$.1)$ or Buy Equipment $($Alt$.2)$

December $11$

$\backslash$table$[[,\backslash$table$[[$Lease Equipment$],[($Alternative $1)]],\backslash$table$[[$Buy Equipment$],[($Alternative $2)]],\backslash$table$[[$Differential Effects$],[($Alternative $2)]]],[$Unit costs:$],[$Purchase price,$0\mathrm{.}00,$$$,$$