13 Leasing Cash Flows You work for an airline that is contemplating leasing a new-design plane geonavigational system. The system costs €22 million and will be depreciated using the straight line method.

At the end of four years, the geo-navigational system will have zero value. You can lease it for €6.25 million per year for four years. If the appropriate pre-tax discount rate is 5 per cent, what is the value of the lease to the lessor? Assume a 23 per cent tax bracket.