Dayton Dockyards is considering a portable piece of transport equipment to help in offloading ships and uploading tractor trailers. The equipment has an initial capital cost of $5,000,000 but would increase operating cash flow by $1,500,000 each year for five years. The equipment could be sold for a net cash flow of $1,000,000 in five years. If the hurdle rate is 14%, and the initial cost of working capital is $500,000, should the dockyard purchase the equipment?

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The Answer of Dayton Dockyards is considering a portable piece of transport equipment to help in offloading ships and uploading tractor trailers. The equipment has an initial capital cost of $5,000,000 but would increase operating cash flow by $1,500,000 each year for five years. The equipment could be sold for a net cash flow of $1,000,000 in five years. If the hurdle rate is 14%, and the initial cost of working capital is $500,000, should the dockyard purchase the equipment?

Dayton Dockyards Is Considering a Portable Piece of Transport Equipment