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A company purchased a tracking software today for its warehouse which, along with the computer system and ancillaries to run it costs $1.6 million. This
A company purchased a tracking software today for its warehouse which, along with the computer system and ancillaries to run it costs $1.6 million. This purchase will be depreciated over five years using straight-line depreciation with zero salvage value. It is expected that the software will reduce inventory by $10.7 million at the end of the first year after it is installed. The use of tracking software does not increase revenue, and it will increase the operating cost by $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? $10.756 million O $10.380 million $9.680 million $11.832 million
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