You purchase a special equipment that reduces defects by $15,000 per year on an item. This item is sold on contract for the next 5 years. After the contract expires, the special equipment will save approximately $5,000 per year for five years. You assume that the machine has no market value at the end of 10 years. How much can you afford to pay for this equipment now if you require a 12% annual return on your investment?

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