What is the incremental cash flow between machines B and A for different years?
Calculation of Incremental Cash Flow
To determine the incremental cash flow between machines B and A, we need to calculate the difference in cash flows for each year.
Year 0
The incremental cash flow in year 0 is the difference between the cash flow of machine B and machine A. From the given information, the cash flow for machine B in year 0 is -10000, and for machine A, it is also -10000. Therefore, the incremental cash flow in year 0 is:
Incremental cash flow = Cash flow of machine B - Cash flow of machine A
Incremental cash flow = -10000 - (-10000)
Incremental cash flow = 0
Year 3
The incremental cash flow in year 3 is the difference between the cash flow of machine B and machine A. From the given information, the cash flow for machine B in year 3 is -1800, and for machine A, it is 13200. Therefore, the incremental cash flow in year 3 is:
Incremental cash flow = Cash flow of machine B - Cash flow of machine A
Incremental cash flow = -1800 - 13200
Incremental cash flow = -15000
Year 6
The incremental cash flow in year 6 is the difference between the cash flow of machine B and machine A. From the given information, the cash flow for machine B in year 6 is 1200, and for machine A, it is 13200. Therefore, the incremental cash flow in year 6 is:
Incremental cash flow = Cash flow of machine B - Cash flow of machine A
Incremental cash flow = 1200 - 13200
Incremental cash flow = -12000
Therefore, the incremental cash flow between machines B and A is as follows:
(a) Year 0: 0
(b) Year 3: -15000
(c) Year 6: -12000