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:                                      $50,000                 $50,000                 $50,000

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 34%. What is the NPW of each and what would you choose?

A) Naked Peel: -52,815; Skinner: -50,285; POM: -48,111; POM

B) Naked Peel: -42,594; Skinner: -39,949; POM: -46,171; POM

C) Naked Peel: -21,894; Skinner: -24,645; POM: -38,385; Naked Peel