A Company Buys Tracking Software for Its Warehouse Which, Along

question 20

Multiple Choice

A company buys tracking software for its warehouse which, along with the computer system and ancillaries to run it, will cost $1.6 million. This purchase will be deducted over five years. It is expected that the software will reduce inventory by $10.7 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) $10.756 million
• B) $10.380 million
• C) $9.680 million
• D) $11.832 million

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Definitions:

Audiovisual Format

A media format involving both sound and visual components, used for education, entertainment, and presentations.

Lecturing

The act of giving an educational speech or presentation to an audience, typically in a formal academic setting.

Teaching Schedule

A planned timetable that outlines the times and dates of teaching sessions, including the content to be covered in each session.

ICU

Intensive Care Unit; a specialized department in hospitals that provides comprehensive and constant care for patients with life-threatening conditions.