Question $10-4$

The Rustic Welt Company is proposing to replace its old welt$-$making machinery with

more modern equipment. The new equipment costs $$9$ million $($the existing

equipment has zero salvage value$).$ The attraction of the new machinery is that it is

expected to cut manufacturing costs from their current level of $$8$ a week to $$4.$

However, as the following table shows, there is some uncertainty both about future

sales and about the performance of the new machinery.

Conduct a sensitivity analysis, assuming a discount rate of $12\%.$ Rustic Welt does

not pay taxes.