A Company Buys Tracking Software for Its Warehouse Which,along with the Computer

question 34

Multiple Choice

A company buys tracking software for its warehouse which,along with the computer system and ancillaries to run it,will cost $1.8 million.The new equipment and software falls under asset class 50 and has a capital cost allowance (CCA) rate of 55%.It is expected that the software will reduce inventory by $10.5 million at the end of the first year after it is installed,though there will be an annual cost of $120,000 per year to run the system.If the company's marginal tax rate is 40%,how will the purchase of this item change the company's free cash flows in the first year?

• A)$10,020,000
• B)$10,278,000
• C)$10,422,000
• D)$10,566,000
• E)$10,578,000

---

Definitions:

Tolerance

The capacity of an organism to endure exposure to a particular substance or environmental condition without adverse effects.

Hemlock

A type of plant belonging to the family Apiaceae, some species of which are toxic, and others, such as the trees in the genus Tsuga, are valuable timber resources.

Pine Cones

The seed-bearing structures of pine trees, which play a crucial role in the reproductive process of these plants.

Primary Succession

is the process of ecosystem development or recovery on a site where no biological community previously existed, such as on bare rock or lava flows.