If the Market Value of a Firm Is $6 Billion

question 62

Multiple Choice

If the market value of a firm is $6 billion and the replacement cost of installed capital is equal to $3 billion,then Tobin's q is equal to ________.

• A)9
• B)3
• C)18
• D)2

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Definitions:

Earnings Before Interest

Earnings Before Interest, often abbreviated as EBI, refers to a company's profit before any interest expenses are deducted. It shows the financial performance from operational activities.

CCA Class

Refers to a classification under the Canadian Capital Cost Allowance that groups assets of a similar nature for depreciation purposes.

Net Working Capital

The gap between a business's current resources and its present debts, showcasing its financial stability in the near term.

Net Present Value

A valuation method that calculates the present value of all future cash flows of a project or investment, net of the initial investment cost.