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Sensitivity analysis (S10.1) The Rustic Welt Company is proposing to replace its old weltmaking machinery with more modern equipment. The new equipment costs $9 million
Sensitivity analysis (S10.1) The Rustic Welt Company is proposing to replace its old weltmaking 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 welt to $4. However, as the following table shows, there is some uncertainty both about future sales and about the performance of the new machinery: Following the solution shown in the prep problems, what is the equivalent cost savings in million dollars if the pessimistic manufacturing cost with the new machinery of $6 per welt materializes, everything else the same. Submit your written solution in the next question. 0.91 -0.59 0.41 0.01
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