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MKM International is seeking to purchase a new CNC machine in order to reduce costs. Two alternative machines are in consideration. Machine 1 costs $500,000,
MKM International is seeking to purchase a new CNC machine in order to reduce costs. Two alternative machines are in consideration. Machine 1 costs $500,000, but yields a 15 percent savings over the current machine used. Machine 2 costs $900,000, but yields a 25 percent savings over the current machine used. In order to meet demand, the following forecasted cost information for the current machine is also provided. Year 1 2 3 4 5 Project Cost 1,000,000 1,350,000 1,400,000 1,500,000 2,500,000 a. Based on the NPV of the cash flows for these 5 years, which machine should MKM International purchase? Assume a discount rate of 13 percent. Assuming a discount rate of 13 percent, MKM International should purchase because the NPV of machine 1 is $ and the NPV of machine 2 is $ (Enter your responses rounded to the nearest whole number.)
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