Aerelon Airways,a Commercial Airline,suffers a Major Crash

question 78

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
• E)$1.76

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Definitions:

Identical

Exactly the same in every way; often used in the context of identical twins who share the exact same genetic makeup.

Polygenic Inheritance

A mode of inheritance in which traits are controlled by multiple genes, contributing to the phenotype in a cumulative or additive manner.

Traits

Characteristics or qualities that are inherent to a person or entity, often used to describe personality attributes.

Genes

Genes are the basic physical and functional units of heredity, made up of DNA, that determine the characteristics of an organism.