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Aerelon Airways, a commercial airline, suffers a major crash. As a result, passengers are considered ...

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Aerelon Airways, a commercial airline, suffers a major crash. As a result, passengers are considered ...

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?

▸ $1.45

▸ $1.28

▸ $1.11

▸ $0.98

Textbook

Fundamentals of Corporate Finance

Edition: 2^nd

Authors: Berk, DeMarzo, Harford

Read 130 times

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