The Charleston Company Is a Relatively Small,privately Owned Firm

question 11

Multiple Choice

The Charleston Company is a relatively small,privately owned firm.Last year the company had after-tax income of $15,000,and 10,000 shares were outstanding.The owners were trying to determine the market value for the stock,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 Charleston's stock.

• A) $10.00
• B) $7.50
• C) $5.00
• D) $2.50
• E) $1.50

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Definitions:

Final Product

A good or service that has completed all stages of production and is ready for consumption by the end-user.

Labor Costs

The total sum of all wages, benefits, and taxes paid to employees by an employer for work performed.

Production Costs

The total expenses incurred in the manufacturing of a product, including labor, materials, and overhead.

Wage Rates

The standardized amount of compensation paid to an employee by an employer in exchange for labor, typically measured per hour or piece of work.