If new equipment is replacing old equipment, any salvage received from sale of the old equipment should not be considered in computing the payback period of the new equipment.

The payback period calculation typically includes all initial cash outflows and inflows over the life of the project, including salvage values of the new equipment. However, the salvage value from the sale of old equipment being replaced is not relevant to the payback period calculation of the new equipment, as it does not represent a cash flow resulting from the new investment.