Aerelon Airways,a Commercial Airline,suffers a Major Crash

Aerelon Airways,a commercial airline,suffers a major crash.As a result,passengers are considered to be less likely to choose Aerelon as their carrier,and it is expected free cash flows will fall by $20 million per year for five years.If Aerelon has 65 million shares outstanding,an equity cost of capital of 12%,and no debt,by how much would Aerelon's shares be expected to fall in price as a result of this accident?

A) $0.98
B) $1.11
C) $1.28
D) $1.45
E) $1.76

Correct Answer:

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