When evaluating whether to lease or sell equipment,the book value of the equipment is a sunk cost and not a differential cost.

Question

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The book value of the equipment is a historical cost and is not relevant in the decision-making process of choosing between leasing or selling equipment as it is a sunk cost that has already been incurred. Differential costs, which are differences in costs between the two alternatives, should be considered to make the best decision.

When Evaluating Whether to Lease or Sell Equipment,the Book Value