Assume that the lease payments were actually $260,000 per year, that Consolidated Leasing is also in the 40 percent tax bracket, and that it also forecasts a $200,000 residual value. Also, to furnish the maintenance support, Consolidated would have to purchase a maintenance contract from the manufacturer at the same $20,000 annual cost, again paid in advance. Consolidated Leasing can obtain an expected 10 percent pre-tax return on investments of similar risk. What would Consolidated's NPV and IRR of leasing be under these conditions? Year = 0 1 2 3 4 Present Value of Owning Equipment cost Depreciation shield (see above) Maintenance Tax savings on maintenance Lease payment Tax on lease payment Residual value Tax on residual value Net cash flow PV @ 6% IRR