A chemical plant is considering purchasing a computerized control system. The initial cost

is $$200,000,$ and the system will produce net savings of $$100,000$ per year. If purchased, the

system will be depreciated under MACRS as a five$-$year recovery property. The system will

be used for four years, at the end of which time the firm expects to sell it for $$30,000.$ The

firm's marginal tax rate on this investment is $28\%.$ Any capital gains will be taxed at the

same income tax rate. The firm is considering purchasing the computer control system

either through its retained earnings or through borrowing from a local bank. Two

commercial banks are willing to lend the $$200,000$ at an interest rate of $10\%,$ but each

requires different repayment plans $($See Table below$).$ Bank A requires four equal annual

payments with interest calculated separately based on the unpaid balance prior to each

payment. Bank B offers a traditional installment payment plan with five equal annual

payments $($interest $+$ principal $=$ equal payment$).$

a$.$ Determine the cash flows inf the computer control system is to be bought through its

retained earnings equity financing$)$

b$.$ Determine the cash flows if the asset is financed entirely through Bank

debt financing$)$

c$.$ Determine the cash flows if the asset is financed entirely through Bank B

debt financing$)$