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Super Golf Products is considering whether to upgrade its equipment. Managers are considering two options. Equipment manufactured by Preston Inc. costs $1,200,000 and will
Super Golf Products is considering whether to upgrade its equipment. Managers are considering two options. Equipment manufactured by Preston Inc. costs $1,200,000 and will last four years and have no residual value. The Preston equipment will generate annual operating income of $198,000. Equipment manufactured by Lakeside Limited costs $1,170,000 and will remain useful for five years. It promises annual operating income of $234,000, 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.) Average annual operating income from asset Initial investment Preston = Accounting rate of return %
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