Beverly Enterprises owns a nursing home that is currently earning $2 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...

Beverly Enterprises owns a nursing home that is currently earning $2 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? What accounting principles would you use in this exercise?