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.

Question

Quizplus · Accepted Answer

Tobin's q is calculated as the market value of the firm divided by the replacement cost of the firm's assets. Here, the market value is 100 shares * $2/share = $200, and the replacement cost is 100 machines * $1/machine = $100. Thus, Tobin's q = $200 / $100 = 2.

Suppose a Firm Has 100 Machines and 100 Shares Outstanding