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Elizabeth Islands Airways (ticker: EIA), a small, regional airline serving the New England area, recently suffered a major crash. As a result, passengers are considered
Elizabeth Islands Airways (ticker: EIA), a small, regional airline serving the New England area, recently suffered a major crash. As a result, passengers are considered to be less likely to choose EIA as their air carrier when making travel plans. You expect that free cash flows will fall by $16 million per year for five years, after which you anticipate that business will return to normal. If EIA has 50 million shares outstanding, an equity cost of capital of 9%, and no debt, by how much would one share of EIA stock be expected to fall in price as a result of this accident? A. $1.37 B. $1.62 C. $1.24 D. $1.12
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