, reported net sales of $19,323 million, net income of
$1,997 million, and no significant discontinued operations, extraordinary items, or accounting changes. Earnings per share was $2.20. At a capitalization rate of 5%, how much should one share of Mango stock be worth? Compare your estimated stock price with the market price of $94.02 as quoted in the newspaper. Based on your estimated market value, should you buy, hold, or sell Mango stock? SOLUTION Estimated value of one share of Mango stock
Earnings per share
Investment capitalization rate
$2.20 .05
$44.00
Mangos stock is quoted at $94.02. At that price, an investor should sell because the investor believes the stock is worth only $44.00.