Calculate Tobin's Q for a Firm

Multiple Choice

Calculate Tobin's q for a firm. You have the following information: MPK = 2 percent, R = 4 percent, the stock market value is $1,728, the capital stock is 12 units, and the price of stock is $120. Based on this information, Tobin's q is ________. Given your answer, the market believes the firm should ________.

A) 1.2; invest in more capital
B) 1.3; disinvest in capital
C) 0.83; disinvest in capital
D) 0.75; invest in more capital
E) 2.07; raise its depreciation rate