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What should happen to hotair stock price on announcement

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Reference no: EM133000960

HotAir, Inc. announces that it is recalling one of its leading air bags from the market, owing to the flying shrapnel when the airbag is deployed. As a result, its future expected free cash flow to shareholders (the firm has no debt) will decline by $70 million per year for the next 8 years. HotAir has 30 million shares outstanding and an equity cost of capital of 7%. If this news came as a complete surprise to investors, what should happen to HotAir's stock price upon the announcement?

Reference no: EM133000960

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