If beverly enterprises has a cost of capital equal to 15


Beverly Enterprises owns a nursing home that is currently earning $2.0 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 $20 million, a replacement cost of $40 million, and a current sale value of $10 million. If Beverly Enterprises has a cost of capital equal to 15 percent, at what value of annual cash flow would Beverly Enterprises be likely to sell the nursing home?

A. $1,600,000
B. $1,500,000
C. $1,550,000
D. None of the above

 

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Operation Management: If beverly enterprises has a cost of capital equal to 15
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