Pinion Potato Chip Inc. must purchase new potato peeling equipment for its plant in Union City, Tennessee. The plant engineer has determined the…
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-Matic
First Cost: $55,000 $58,000 $70,000
Annual Costs: $6,000 $5000 $5,000
Declared Salvage Value 12 % of FC $5,500 $10,000
Useful Life 6 years 6 years 6 years
Actual Salvage Value $6,500 $5,500 $12,000
All 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; POM
B)Naked Peel: -45,371; Skinner: -44,116; POM: -60,266; Skinner
C) Naked Peel: -56,614; Skinner: -56,311; POM: -63,175; Skinner
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