Suppose the stock price for a firm in Manitoba is $10 per share.The firm has 5 machines and 1,000 shares outstanding.Suppose the price of a new machine is $1,500.
a.What is Tobin's q for this firm?
b.Should this firm make new investment (buy new machine)? Why?
c.Assume the firm's stock price falls down to $6 per share.Should the firm buy new machine?
d.Assume the price of a new machine rises to $1,800.Using the original information for the other variables,should the firm make new investment?
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