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

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
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:

Sales millions of welts

.4

.5

.7

Manufacturing cost with new machinery dollars per welt

6

4

3

Economic life of new machinery years

7

10

13

Conduct a sensitivity analysis of the replacement decision assuming a discount rate of 12%. Rustic Welt does not pay taxes.