Hamdan manages the ARTA Manufacturing. Hamdan has been approached by new production manager regarding the possible replacement of a large piece of manufacturing equipment that ARTA uses in its process with a more efficient model. While the representative made some compelling arguments in favor of replacing the 3-year-old equipment, Hamdan is hesitant. Hamdan is hoping to be promoted next year to manager of the larger project and he knows that the accrual-basis net operating income of the ARTA will be evaluated closely as part of the promotion decision. The following information is available concerning the equipment replacement decision: - The historic cost of the old machine is $400,000. It has a current book value of $220,000, two remaining years of useful life, and a market value of $150,000. Annual depreciation expense is $60,000. It is expected to have a salvage value of $0 at the end of its useful life. - The new equipment will cost $280,000. It will have a two-year useful life and a $0 salvage value. ARTA uses straight-line depreciation on all equipment. - The new equipment will reduce electricity costs by $130,000 per year and will reduce direct manufacturing labor costs by $60,000 per year. For simplicity, ignore income taxes and the time value of money. Required: a. Assume that Hamdans priority is to receive the promotion, and he makes the equipment replacement decision based on next years accrual-based net operating income. Which alternative would he choose? Show your calculations. b. What are the relevant factor for decision?