Determining the value of annual cash flow


Poor Enterprises owns a nursing home that is currently earning $3.0 million in cash flow on an annual basis, but this amount is expected to drop in the future. The nursing home has a book value of $30 million, a replacement cost of $50 million, and a current sale value of $20 million. If Beverly Enterprises has a cost of capital equal to 12 percent, at what value of annual cash flow would Beverly Enterprises be likely to sell the nursing home?

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Finance Basics: Determining the value of annual cash flow
Reference No:- TGS040547

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