EXAMPLE 8.2 A sole-source vendor can supply a new industrial park with large transformers suitable for underground utilities and vault-type installation. Type A has an initial cost of $70,000 and a life of 8 years. Type B has an initial cost of $95,000 and a life expectancy of 12 years. The annual operating cost for type A is expected to be $9000, while the AOC for type B is expected to be $7000. If the salvage values are $5000 and $10,000 for type A and type B, respectively, tabulate the incremental cash flow using their LCM for hand and spreadsheet solutions. Solution by Hand The LCM of 8 and 12 is 24 years. In the incremental cash flow tabulation for 24 years (Table 8-3), note that the reinvestment and salvage values are shown in years 8 and 16 for type A and in year 12 for type B