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Inman Construction Company is considering selling excess machinery with a book value of $280,000 (original cost of $400,000 less accumulated depreciation of $120,000) for $292,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $312,000 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $36,000.

a. Prepare a differential analysis report, dated January 3, 2010, for the lease or sell decision. Enter all amounts as positive numbers.

Proposal to Lease or Sell Machinery
January 3, 2010

Differential revenue from alternatives: __________
Revenue from lease _______
Proceeds from sale ________
Differential revenue from lease ___________
Differential cost of alternatives: ______________
Repairs, insurance, and property tax expenses from lease ________
Commission on sale _______
Differential cost of lease
Net differential from lease alternative

b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain. The input in the box below will not be graded, but may be reviewed and considered by your instructor.