How much could the client afford to pay

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Reference no: EM131926440

Question: A client who is constructing a warehouse instructs the contractor to omit insulation. The client explains that he will operate the building for several months and then install the insulation as a repair, so that he can deduct the expense from income tax at the end of the first year rather than spread it as straight-line depreciation over the 8-year tax life of the warehouse. The contractor points out that a later installation will cost more than the $20,000 cost of installing the insulation with the original construction. How much could the client afford to pay for the later installation for equal profit if he plans on a 15 percent return on his investment and corporation income taxes are 50 percent?

Reference no: EM131926440

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