2. Comfort Golf Products is considering whether to upgrade its equipment. Managers are considering two options. Equipment manufactured by McKnight Inc. costs $900,000 and will last six years and have no residual value. The McKnight equipment will generate annual operating income of $153,000. Equipment manufactured by Riverbank Limited costs $1,150,000 and will remain useful for seven years. It promises annual operating income of $235,750, and its expected residual value is $105,000. Which equipment offers the higher ARR? First, enter the formula, then calculate the ARR (Accounting Rate of Return) for both pieces of equipment. (Enter the answer as a percent rounded to the nearest tenth percent.) Accounting (1) . (2) = rate of return McKnight - % Riverbank . % Which equipment offers the higher ARR? The (3) equipment offers the higher rate of return. (1) OOOO O Accounting rate of return O Accumulated depreciation Annual depreciation Average annual net cash inflow O Average annual operating income from asset O Expected annual net cash inflow O Initial investment (2) (3) McKnight Riverbank Present value Residual value Total cash inflows Future value Initial investment Net present value