The Ramaphosa Company Is a Relatively Small, Privately Owned Firm

question 5

Multiple Choice

The Ramaphosa Company is a relatively small, privately owned firm.Last year the company had after-tax income of R15,000, and 10,000 shares were outstanding.The owners were trying to determine the market value of the shares, prior to taking the company public.A similar firm which is publicly traded had a price/earnings ratio of 5.0.Using only the information given, estimate the market value of one share of Ramaphosa's stock.

• A) R10.00
• B) R7.50
• C) R5.00
• D) R2.50
• E) R1.50

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Definitions:

Maturity Matching

Maturity matching is a financial strategy that involves aligning the duration of assets and liabilities to manage liquidity and risk.

Fifteen-Year Bonds

Fixed income securities that mature or become due for repayment fifteen years after their issue date.

Capital Market

A financial market in which long-term debt or equity-backed securities are bought and sold, facilitating the raising of capital.

Interest

The cost of borrowing money, typically expressed as a percentage of the amount borrowed.