If the capital budgeting decision includes a replacement analysis, then

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In replacement analysis, only incremental cash flows should be looked at because the decision is focused on whether to replace an old asset with a new one, and the relevant cash flows are only those that will change as a result of the replacement decision. The gain from the sale of the old asset would be considered a sunk cost and not an inflow because it is not related to the new project's cash flows. The sale price and tax savings from the old asset would not increase the cash inflows of the new asset's life.

If the Capital Budgeting Decision Includes a Replacement Analysis, Then