8.1

Identifying relevant information

Cherry, inc, currently has a machine that costs $50,000 per year to operate. The machine can produce 60,000 units per year. two years ago the company borrowed $450,000 to purchase the machine; it still owes $325,000 of that amount. Cherry could sell the machine for $295,000 and purchase a new, more efficient machine at a cost of $480,000. The new machine can produce 85,000 units per year; its annual operating vosts would be $55,000.

REQUIRED

idenftif each piece of information in this scenario and indicate whether it is relevant or irrelevant to the descion to purchase the new machine.