If the capital budgeting decision includes a replacement analysis, then

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In a replacement analysis, only incremental cash flows should be considered, meaning the difference between the cash inflows and outflows of the new asset and the old asset. The gain from the sale of the old asset may be offset by the cost of disposing of it, so it should not be included as a cash inflow. The tax savings from the sale may also not be relevant to the analysis. The sale price of the old asset may be considered as a cash inflow, but it should not affect the cash inflows of the new asset's life.

If the Capital Budgeting Decision Includes a Replacement Analysis, Then