Consider 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 6 per cent.