Suppose a Firm Has 100 Machines and 100 Shares Outstanding

question 27

Multiple Choice

Suppose a firm has 100 machines and 100 shares outstanding.The price per share is $2,and the purchase price of a machine is $1.So Tobin's q is equal to

• A)2.
• B)1.
• C)0.5.
• D)1.5.

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Definitions:

Break-even Point

The point at which total costs and total revenues are equal, resulting in no net gain or loss.

Contribution Margin Ratio

A financial metric indicating how much of each sales dollar contributes to fixed costs and profit after variable costs are covered.

Target Pre-tax Income

The income goal set by a company before any taxes are applied.

Contribution Margin Per Unit

The difference between the selling price per unit and the variable cost per unit.