Differential Analysis for a Lease or Sell Decision Granite Construction Company is considering selling excess machinery with a b
ook value of $282,400 (original cost of $400,700 less accumulated depreciation of $118,300) for $275,700, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $284,900 for five years, after which it is expected to have no residual value. During the period of the lease, Granite Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $24,600. Required:
Prepare a differential analysis, dated November 7 to determine whether Granite should lease (Alternative 1) or sell (Alternative 2) the machinery.
Capital gains and losses netting will have no effect on tax payable. The individual impact on tax will be same as of netting the gains and losses. The net outcome of the tax will be remain un impacted.
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