Calculate Tobin's Q for a Firm

question 40

Multiple Choice

Calculate Tobin's q for a firm. You have the following information: MPK = 2 percent, R = 4 percent, the stock market value is $1,728, the capital stock is 12 units, and the price of stock is $120. Based on this information, Tobin's q is ________. 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:

Majority

The greater part or number; in the context of votes, it refers to more than half of the total count.

Appellate Court

A court that reviews the decisions of lower courts to determine if legal errors were made that could change the outcome of a case.

Disposition

The final settlement or conclusion of a court case or legal matter.

Affirmed

A term used in law to indicate that a decision made at a lower court level is confirmed by a higher court.