Is it possible to mount a .DMG file that is on an SMB share on the network, or do I have to copy it locally first?

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Yes, you should have no problem mounting a DMG that lives on a network-mounted volume.

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I've been able to do so in the past.

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Disk Images don't care where they are located, but being on a network volume means that the OS /HDIUtil/Disk Utility will not be able to load the DMG as fast as if it was on a local volume.... So expect slower load times, and if it's read/write, slower write speeds...

But as the other folks have stated, it doesn't matter where it's located...

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