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Santos Golf Products is considering whether to upgrade its equipment. Managers are considering two options....

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Accounting

Santos Golf Products is considering whether to upgrade its equipment. Managers are considering two options. Equipment manufactured by Smith Inc. costs $ 800000 and will last five years and have no residual value. The Smith equipment will generate annual operating income of $ 156000. Equipment manufactured by Little Stream Limited costs $ 1,150,000 and will remain useful for six years. It promises annual operating income of $ 235750, and its expected residual value is $ 100000.
Which equipment offers the higher ARR?
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