Santos Golf Products is considering whether to upgrade its equipment Managers are considering two options. Equipment manufactured by Vargas Inc. costs $900,000 and will last six years and have no residual value. The Vargas equipment will generate annual operating income of $153,000. Equipment manufactured by Riverside 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 $110,000. 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 I Average annual operating income from asset 153,000 235,750 Initial investment 900,000 Vargas = = = rate of return 17.0 % 37.42 % Riverside 1,260,000