You work for a nuclear research laboratory that is contemplating leasing a diagnosticscanner (leasing is a very common practice with expensive, high-tech equipment). Thescanner costs $2,000,000, and it would be depreciated straight-line to zero over fouryears. Because of radiation contamination, it will actually be completely valueless infour years. You can lease it for $600,000 per year for four years.

2.What are the cash flows from the lease from the lessorsviewpoint? Assume a 35 percent tax bracket

4.Assume that your company does not contem-plate paying taxes for the next several years. What are the cash flows from leasing in this case?

5.In the previous question, over what range of leasepayments will the lease be profitable for both parties?