According to Tobin's q theory, if q is ________, new plant and equipment capital is ________ relative to the market value of business firms, so companies can buy a lot of new investment goods with only a ________ issue of stock.
A) high; expensive; large
B) high; cheap; large
C) high; cheap; small
D) low; cheap; large
E) low; cheap; small

Question

Quizplus · Accepted Answer

According to Tobin's q theory, if q is high, the market value of business firms is high relative to their replacement cost, indicating that companies can purchase new plant and equipment capital for cheap. Therefore, companies can buy a lot of new investment goods with only a small issue of stock.

According to Tobin's Q Theory, If Q Is ________, New