The Rustic Welt Company is proposing to replace its old welt-making machinery with more modern equipment. The new equipment costs $12 million, is expected to last 9 years and has no salvage value. The existing equipment has a zero salvage value. The new machinery is expected to cut manufacturing costs from their current level of $7 per unit to $3. However, as the following table shows, there is uncertainty about future sales and unit costs. The opportunity cost of capital is 10%. Ignore taxes. Conduct a sensitivity analysis of the replacement decision. (12)

	Pessimistic	Expected
Sales in millions of welts	0.5	0.6
Manufacturing cost per welt	$5	$3