The RW 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 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:

	Pessimistic	Expected	Optimist
Sales, millions of welts	0.4	0.5	0.7
Manufacturing Cost with new machinery, dollars per welt	6	4	3
Economic life of new machinery, years	7	10	13

Calculate the annual cost savings of the expected scenario under the three states of nature. Assume a discount rate of 12%. RW does not pay taxes.