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

question 7

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.This purchase will be deducted over five years.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

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