Decisions Based on Total Versus Differential Cash-Flow Streams
For some bases of comparison (Chapter 8), it's reasonable to compare the alternatives on a total cash-flow basis. For instance, two alternatives can be compared on total present worth. Simply put, if the present worth (at the MARR) of one alternative is greater than the present worth of the other, the first alternative is the better choice between the two. Comparing total cash-flow streams is reasonable when the basis of comparison is PW(), FW(), or AE().
Comparing with PW(), FW(), and AE() can also be done using the differential cash-flow stream (also known as incremental cash-flow analysis). The differential cash-flow stream between two alternatives, say Ax and Ay, is simply the ...
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