Calculate Tobin's Q for a Firm

question 84

Multiple Choice

Calculate Tobin's q for a firm.You have the following information: MPK = 2%,R = 4%,the stock market value is $1,728,the capital stock is 12 units,and the price of stock is $120.What is Tobin's q? Given your answer,the market believes the firm should

• A)1.2;invest in more capital.
• B)1.3;disinvest in capital.
• C)0.83;disinvest in capital.
• D)0.75;invest in more capital.
• E)2.07;raise its depreciation rate.

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Definitions:

Monopolistic Competition

A market structure where many companies sell products that are similar but not identical, allowing for competition on factors other than price.

General Snacks

A broad category that includes various snack foods available in the market, without any specific branding implication.

Long-Run Outcome

The eventual results or consequences of economic decisions and market conditions after all adjustments have been made.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for product differentiation and some control over prices.