The Charleston Company Is a Relatively Small, Privately Owned Firm

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 equilibrium 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