If the market value of a firm is $6 billion and Tobin's q is equal to 2,then the replacement cost of installed capital must be ________.
A)$2 billion
B)$3 billion
C)$9 billion
D)$18 billion

Question

Quizplus · Accepted Answer

Tobin's q is calculated as the market value of a firm divided by the replacement cost of its assets. If Tobin's q is 2 and the market value is $6 billion, then the replacement cost of installed capital is $6 billion / 2 = $3 billion.

If the Market Value of a Firm Is $6 Billion