Pike Industries is considering selling excess machinery with a book value of $150,000 (original cost of $475,000 less accumulated depreciation of $325,000) for $72,500less a 5% brokerage commission. Alternatively, the machinery can be leased out for a total of $107,500 for five years, after which it is expected to have no residual value.During the period of the lease, Pike Industries' costs of repairs, insurance, and property tax expenses are expected to be $40,000.a. Prepare a differential analysis report for the lease or sell decision.PIKE INDUSTRIESProposal to Lease or Sell MachineryDifferential Analysis ReportDifferenti revenue from alternatives:Differential cost of alternatives:b. Based on the data presented, which is the most appropriate plan of action?

Selling of the machinery is the most appropriate alternative.

Answered: stries is considering selling excess…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 9P

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