Solution
Incremental cash flow is tabulated in Table 8–2. The subtraction performed is (new – used)
since the new machine has a larger initial cost. The salvage values in year 25 are separated
from ordinary cash fl ow for clarity. When disbursements are the same for a number of consecutive
years, for hand solution only , it saves time to make a single cash fl ow listing, as is
done for years 1 to 25. However, remember that several years were combined when performing
the analysis. This approach cannot be used for spreadsheets, when the IRR or NPV function is
used, as each year must be entered separately.