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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
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
Riverbank
Limited costs
$1,375,000
and will remain useful for
seven
years. It promises annual operating income of
$247,500,
and its expected residual value is
$105,000.
Which equipment offers the higher ARR?
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