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

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