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Radda [10]
3 years ago
7

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
Business
1 answer:
koban [17]3 years ago
6 0

Answer:

The company's free cash flows in the first year will be of $10.756 million

Explanation:

In order to calculate how will the purchase of this item change the company's free cash flows in the first year we would have to calculate the following:

free cash flows = inventory reducing - aftertax annual cost + depreciation tax shield

inventory reducing = $10.7  million

aftertax annual cost = 0.12*(1-40%) = $0.072

depreciation tax shield = 1.6/5*40% = $0.128

Therefore, free cash flows =$10.7 - $0.072 + $0.128 = 10.756

free cash flows =$10.756 million

The company's free cash flows in the first year will be of $10.756 million

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Which of the following requirements must be met for a redemption to be treated as substantially​ disproportionate? A. The shareh
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Answer:

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Explanation:

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3 years ago
In its most recent annual report, Appalachian Beverages reported current assets of $39,900 and a current ratio of 1.90. Assume t
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Answer:

Appalachian Beverages

The Updated current ratio is:

= 1.65

Explanation:

a) Data and Calculations:

Current assets = $39,900

Current ratio = 1.90

Current liabilities = $21,000 ($39,900/1.90)

Current Assets:

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Inventory                      $5,100

Cash                           ($2,000)

Ending balance =      $43,000

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Accounts Payable       $5,100

Ending balance =      $26,100

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