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 $15million per year for five years. If Aerelon has 55 million shares outstanding, an
equity cost of capital of 10%, and no debt, by how much would Aerelonʹs shares be expected to
fall in price as a result of this accident?
A) $0.93
B) $1.03
C) $1.14
D) $1.34