The Wheatena Company is considering the purchase of a new milling machine. What purchase price makes the NPV of the project zero? Base your analysis on the following facts:

• The new milling machine will reduce operating expenses by exactly $20,000 per year for 10 years. Each of these cash flow reductions takes place at the end of the year.

• The old milling machine is now 5 years old and has 10 years of scheduled life remaining.

• The old milling machine was purchased for

$45,000 and has a current market value of

$20,000.

• There are no taxes or inflation.

• The risk-free rate is 10 percent.

AppendixLO1