Problem:
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.
Required:
Question: Using only the information given, estimate the market value of one share of Charleston's stock.
Note: Provide support for your rationale.