Arrow wants to buy a new item of equipment. Two models of equipment are available, one with a slightly higher capacity and greater reliability than the other. The expected costs and profits of each item are as follows. Equipment Equipment item item X Y Capital cost 100,000 175,000 Life 5 years 5 years Profits before depreciation Year 1 50,000 50,000 Year 2 50,000 50,000 Year 3 30,000 60,000 Year 4 20,000 60,000 Year 5 10,000 60,000 Disposal value for equipment 20,000 25,000 ARR is measured as the average annual profits divided by the average investment. Fill in the boxes below to determine which equipment item should be purchased, if the company's target ARR is 25%.