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

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: 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. You are the judge in a settlement case. You need to compute the value  of a piece of land in Denver Co. The valuation is subject to the  following conditions should someone pay today for this land if given the choice?

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