Question

StartUp Inc. is a private company. Here is selected financial information: Sales 80,000 Net income 42,000 total assest 47,000 shares outstanding12,000 StartUp believes if the company were publically listed, Its shares would trade at a price/earnings ratio ( P/E) of 14.0 . If this is true, what would be the price of a share of stock? Enter your answer to the nearest cent (two decimal places) Do not use the dollar sign

Answer 1

The price per share of StartUp Inc. if it were publicly listed with a P/E ratio of 14.0 would be $49.00.

Step-by-step explanation:

To calculate the price of a share of stock for StartUp Inc., assuming it were publicly listed and traded at a price/earnings ratio (P/E) of 14.0, we first need to determine the earnings per share (EPS). The EPS is calculated by dividing the net income by the number of shares outstanding. In this case, the EPS is:

EPS = Net Income / Shares Outstanding = $42,000 / 12,000 shares = $3.50 per share

Next, we apply the P/E ratio to find the stock price:

Stock Price = EPS × P/E Ratio = $3.50 × 14.0 = $49.00

Therefore, the price per share would be $49.00.