Dandelion Fields has a Tobin's Q of .96. The replacement cost of the firm's assets is $225,000 and the market value of the firm's debt is $101,000. The firm has 20,000 shares of stock outstanding and a book value per share of $2.09. What is the market-to-book ratio?
A) 2.75 times
B) 3.18 times
C) 3.54 times
D) 4.01 times
E) 4.20 times

Question

Quizplus · Accepted Answer

Tobin's Q = (Market Value of Assets) / (Replacement Cost of Assets)0.96 = (Market Value of Assets) / 225,000Market Value of Assets = 0.96 * 225,000 = 216,000Market-to-Book Ratio = (Market Value of Assets - Market Value of Debt) / (Book Value of Equity)= (216,000 - 101,000) / (20,000 * 2.09)= 115,000 / 41,800= 2.75 times

Dandelion Fields Has a Tobin's Q of