Aerelon Airways,a Commercial Airline,suffers a Major Crash

question 16

Multiple Choice

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

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Definitions:

Pressurized Steam

Steam that has been compressed to a higher pressure than atmospheric pressure, often used for sterilization or power generation.

Boiling Point

The temperature at which a substance changes from a liquid to a gas, varying based on atmospheric pressure.

Asepsis

Practices or procedures to prevent infection by eliminating microbial contamination.

Medical Office

A workspace designed for the use of healthcare professionals where administrative and clinical operations are performed.