If the capital budgeting decision includes a replacement analysis,then:

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In a replacement analysis, only incremental cash flows should be looked at because the old asset has already been in use and its initial cost and accumulated depreciation are sunk costs that should not be considered in the analysis. Also, the gain from the sale of the old asset should be treated as a separate cash flow item and not as a tax savings inflow. The sale price and tax savings may also affect the cash flows in future periods, so they should be included in the analysis as appropriate.

If the Capital Budgeting Decision Includes a Replacement Analysis,then