Golf Products is considering whether to upgrade its equipment. Managers are considering two options. Equipment manufactured by

Heatherwood

Inc. costs

$900,000

and will last

six

years and have no residual value. The

Heatherwood

equipment will generate annual operating income of

$153,000.

Equipment manufactured by

Riverland

Limited costs

$1,350,000

and will remain useful for

seven

years. It promises annual operating income of

$249,750,

and its expected residual value is

$100,000.

Which equipment offers the higher ARR?