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Audio component when exporting movies to TV

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As seen in other threads I've created, I'm working on creating a library of my DVD collection on my external hard drive to then play on my TV. The question I've come across now is the audio aspect of this process. I'm not sure the differences between the audio options. What are the differences between AAC and AC-3 audio? what do I need to consider when choosing which audio option? For instance, would either work through surround sound when it is hooked up to my television? I'm just not completely clear on this. Thanks for any help!
 

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