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This video tutorial focuses on incremental analysis for deciding whether to retain or replace equipment. It emphasizes comparing relevant costs impacted by both alternatives, including variable manufacturing costs and the cost of new equipment. The book value of the old machine is defined as a sunk cost, which does not influence the decision-making process; it cannot be altered by present or future choices. Book value is the cost of the equipment minus its accumulated depreciation. If the old equipment is eliminated without trade-in value, the book value results in a loss on the income statement, similar to the impact of depreciation. Both scenarios ultimately affect the income statement in the same way.