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This video tutorial covers incremental analysis for deciding whether to replace or retain equipment. It emphasizes comparing costs associated with both alternatives, primarily focusing on variable manufacturing costs and the cost of new equipment. The book value of the old machine is identified as a sunk cost, which is irrelevant to the decision, as it cannot be altered by current or future choices. Book value refers to the original cost of the equipment minus its accumulated depreciation. If the old equipment is eliminated without receiving trade-in value, the book value results in a loss on the income statement, impacting it similarly to continued depreciation.