When Tobin's q is equal to zero,the market is signalling a firm should buy more capital.

Question

Quizplus · Accepted Answer

When Tobin's q is equal to zero, it indicates that the market value of a firm's capital is equal to its replacement cost. In this situation, there is no incentive for the firm to invest in new capital as the market views the current capital as sufficient. Therefore, the market is not signaling for the firm to buy more capital, making option A false.

When Tobin's Q Is Equal to Zero,the Market Is Signalling