According to Tobin's q theory,the principal objective of investment is ________.
A)to increase eligibility for the investment tax credit
B)to expand production
C)to increase the market value of the firm
D)to lower the replacement cost of installed capital

Question

Quizplus · Accepted Answer

Tobin's q theory states that the main objective of investment is to increase the market value of the firm. The theory suggests that firms will invest in projects that are expected to increase the value of the firm by more than the cost of the investment, as measured by the ratio of the market value of the firm to the replacement cost of its assets (known as Tobin's q). Therefore, option C is the correct answer. The other options are not related to Tobin's q theory.

According to Tobin's Q Theory,the Principal Objective of Investment Is