• The purchase price of the land is $50 million.
• The completed cost of the building is $350 million as of the time that the building is occupied and the owners begin to receive lease payments. (the total project cost including land is therefore $400 million)
• The annual net revenue from leases (total lease income minus all of the owner's expenses other than depreciation) is $40 million. The annual accounting profit from the building will be $40 million minus depreciation.
• The building is depreciated using straight line depreciation over a period of 40 years. The salvage value of the structure is $33 million.
• The owner's effective income tax rate is 40%.
• The owner's pre-tax MARR is 15%.
• If the owner sells the building, there will be a 20% capital gains tax on the difference between the sale price and the depreciated basis for the building.

1. Project Evaluation without and with debt.

2. What is the annual accounting profit?