Tobin's Q Equals The

question 45

Multiple Choice

Tobin's q equals the:

• A) cost of buying and renting out one unit of capital measured in units of the economy's output.
• B) marginal product of capital minus the cost of capital.
• C) ratio of the replacement value of installed capital to the market value of installed capital.
• D) ratio of the market value of installed capital to the replacement cost of installed capital.

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Definitions:

Market Value

The existing rate at which an asset or service can be traded in the market.

Incremental Value

The additional or extra value created by undertaking a new project or activity compared to not doing it, often considered in decision-making processes.

All-Equity Firms

Companies that finance their operations without any debt, relying solely on shareholder equity.

Shares Outstanding

The total number of a company's shares of stock that are owned by shareholders, including those held by institutional investors and restricted shares held by insiders and company officers.