How to use straight-line depreciation to pay tax

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Valles Global Industries (VGI) is considering selling a product to SohnCo. The contract sells parts for revenue of $32 million a year for 15 years. Their initial investment is $150 million and the equipment has no salvage at 15 years. They estimate production costs at $7,530,000 per year. They use straight-line depreciation and pay tax at 48%. If VGI's After-Tax MARR is 10%, should they do this project? Why?

Reference no: EM13186433

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