Differential Analysis for a Lease or Sell Decision

Sure-Bilt Construction Company is considering selling excess machinery with a book value of $280,400 (original cost of $400,100 less accumulated depreciation of $119,700) for $276,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $287,200 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,300.

Prepare a differential analysis, dated January 3, 2014, to determine whether Sure-Bilt should lease (Alternative 1) or sell (Alternative 2) the machinery.