the annual cost savings

Question 1

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.