?(Replacement project cash? flows)??The Minot Kit Aircraft Company of? Minot, North? Dakota, uses a plasma cutter...

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?(Replacement project cash? flows)??The Minot Kit AircraftCompany of? Minot, North? Dakota, uses a plasma cutter to fabricatemetal aircraft parts for its plane kits. The company currently isusing a cutter that it purchased four years ago that has a bookvalue of ?$90 000 and is being depreciated ?$22 500 per year overthe next 4 years. If the old cutter were to be sold? today, thecompany estimates that it would bring in an amount equal to thebook value of the equipment. The company is considering thepurchase of a new automated plasma cutter that would cost ?$300000to install and that would be depreciated over the next 4 yearstoward a ?$36 000 salvage value using? straight-line depreciation.The primary advantage of the new cutter is the fact that it isfully automated and can be run by one operator rather than thethree employees that are currently required. The labor savingswould be ?$70 000 per year. The firm faces an income tax rate of 27percent. At the end of the? 4-year project both cutters could besold at their? end-of-project book value.
a.??What are the differential operating cash flow savings peryear during years 1 through 4 for the new plasma? cutter?
b.??What is the initial cash outlay required to replace theexisting plasma cutter with the newer? model?
c.??What does the timeline for the replacement project cashflows for years 0 through 4 look? like?
d.??If the company requires a discount rate of 12 percent fornew? investments, should the plasma cutter be? replaced?

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?(Replacement project cash? flows)??The Minot Kit AircraftCompany of? Minot, North? Dakota, uses a plasma cutter to fabricatemetal aircraft parts for its plane kits. The company currently isusing a cutter that it purchased four years ago that has a bookvalue of ?$90 000 and is being depreciated ?$22 500 per year overthe next 4 years. If the old cutter were to be sold? today, thecompany estimates that it would bring in an amount equal to thebook value of the equipment. The company is considering thepurchase of a new automated plasma cutter that would cost ?$300000to install and that would be depreciated over the next 4 yearstoward a ?$36 000 salvage value using? straight-line depreciation.The primary advantage of the new cutter is the fact that it isfully automated and can be run by one operator rather than thethree employees that are currently required. The labor savingswould be ?$70 000 per year. The firm faces an income tax rate of 27percent. At the end of the? 4-year project both cutters could besold at their? end-of-project book value.a.??What are the differential operating cash flow savings peryear during years 1 through 4 for the new plasma? cutter?b.??What is the initial cash outlay required to replace theexisting plasma cutter with the newer? model?c.??What does the timeline for the replacement project cashflows for years 0 through 4 look? like?d.??If the company requires a discount rate of 12 percent fornew? investments, should the plasma cutter be? replaced?