Pinion Potato Chip Inc.

Pinion Potato Chip Inc. must purchase new potato peeling equipment for its plant in Union City, Tennessee. The plant engineer has determined the following three setups are possibilities:                                                     Naked Peel            Skinner                Peel-o-MaticFirst Cost:                                     $55,000                 $58,000             $70,000Annual Costs:                                $6,000                  $5000                  $5,000Declared Salvage Value                 12 % of FC            $5,500                 $10,000Useful Life                                      6 years                 6 years                6 yearsActual Salvage Value                     $6,500                   $5,500                 $12,000All assets are depreciated using straight line method. Determine which setup should be chosen if the MARR for the firm is 10% and the marginal tax rate is 30%. What is the NPW of each and what would you choose?a) Naked Peel: -25,808; Skinner: -30,671; POM: -53,449; POMB)Naked Peel: -45,371; Skinner: -44,116; POM: -60,266; SkinnerC) Naked Peel: -56,614; Skinner: -56,311; POM: -63,175; Skinner

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