Compute and compare ARR (Learning Objective 2)

Engineered Products is shopping for new equipment. Managers are considering two investments. Equipment manufactured by Atlas costs $1,000,000 and will last five years and have no residual value. The Atlas equipment will generate annual operating income of $160,000. Equipment manufactured by Veras costs $1,200,000 and will remain useful for six years. It promises annual operating income of $240,500, and its expected residual value is $100,000.

Which equipment offers the higher ARR?