Question
The Custom House Company is a relatively small, privately owned firm. Last year the company had after-tax income of $15,000, and 10,000 shares were
The Custom House 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 Custom House's stock. If Commonwealth Corporation has sales of $2 million per year (all credit) and days sales outstanding of 35 days, what is its average amount of accounts receivable outstanding (assume a 360 day year)?
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