Corinth Co. leased non-specialized equipment to Athens Corporation for an eight-year period, at which time possession of the equipment will revert back to Corinth. The equipment cost Corinth $16 million and has an expected useful life of 12 years. Its normal sales price is $22.4 million. The present value of the lease payments for both the lessor and lessee is $20.6 million. The first payment was made at the beginning of the lease. How should Corinth classify this lease?

My teacher gives the below answer:

The present value of the lease payments is greater than substantially all of the fair value of the asset ($20.6 / $22.4 = 92%). The criteria indicate it is a sales-type lease to Corinth. Furthermore, its a sales-type lease with a selling profit because the present value of the lease payments ($20.6 million) exceeds the lessors cost ($16 million).

I don't understand why we should use $22.4 as the fair value, not the $16 carrying at cost.