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 = 3 percent, the stock market value is $1,368, the capital stock is 15 units, and the price of stock is $100. Based on this information, Tobin's q is ________. Given your answer, the market believes the firm should ________.

A) 1.5; invest in capital
B) 0.7; invest in capital
C) 1.1; disinvest in capital
D) 0.9; disinvest in capital
E) 0.8; hold capital constant