ZuoTi.Pro
Question

Assume a firm has a market value of $500, it has 50 units of capital with...

Assume a firm has a market value of $500, it has 50 units of capital with a price of $8 per

unit. Compute Tobin’s q to determine whether the firm should invest in more capital.

q = __________. Invest? (Yes or no) __________

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Cost of replacement of capital = 50*8 = $400

Tobin's q = Market value/Cost of replacement of capital = 500/400 = 1.25
So, it should invest as q > 1.

q = 1.25
Invest - Yes

0 0
Add a comment
Know the answer?
Add Answer to:
Assume a firm has a market value of $500, it has 50 units of capital with...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 5. Assume a firm has a market value of $500, it has 50 units of capital...

    5. Assume a firm has a market value of $500, it has 50 units of capital with a price of $8 per unit. Compute Tobin’s q to determine whether the firm should invest in more capital.     q = __________.    Invest? (Yes or no) __________      6 – 7 Assume G = 50, T = 55, B = 200 and i = 5%. 6. What is the primary budget balance and dollar value of the balance? Balance (surplus of deficit)?...

  • A firm is using 500 units of labor and 100 units of capital to produce 100 units of output. The p...

    A firm is using 500 units of labor and 100 units of capital to produce 100 units of output. The price of labor is $5 per unit and the price of capital is $20 per unit. At these input levels, another unit of labor adds 50 units of output, while another unit of capital adds 400 units of output. The firm could increase output by  ( include explanation please ) a.         10 units by spending $1 more on capital and...

  • pts 220 6 160 Q 50,000 Q 30.000 50 Q 10,000 350 500 800 1.100 Units of labor The price of capital is $500 per un...

    pts 220 6 160 Q 50,000 Q 30.000 50 Q 10,000 350 500 800 1.100 Units of labor The price of capital is $500 per unit. 350 500 800 Units of labor 1,100 The price of capital is $500 per unit. Between 30,000 and 50,000 units of output, how much does each additional unit of output add to long-run total cost? $1.50 O$300 $30,000 O$2.45 none of the above pts 220 6 160 Q 50,000 Q 30.000 50 Q 10,000...

  • In the graph below, the price of capital is $500 per unit. How many units of...

    In the graph below, the price of capital is $500 per unit. How many units of labor should a firm use in order to produce 30,000 units of output at the lowest possible cost? 300 units of labor 320 units of labor 500 units of labor 800 units of labor none of the above Units of op - 50.000 Q - 30,000 Q-10,000 350 500 800 1.100 Ints of in

  • A firm is using 30 units of capital and 30 units of labor to produce 90...

    A firm is using 30 units of capital and 30 units of labor to produce 90 units of output. Capital costs $500 per unit and labor $5,000 per unit. The last unit of capital added 5 units of output, while the last unit of labor added 45 units of output. The firm is /using the cost-minimizing combination of capital and labor. /should use more of both inputs in equal proportions. /should use less of both inputs in equal proportions. /could...

  • Firm C has a market value of $500 million and the stock is trading at $25...

    Firm C has a market value of $500 million and the stock is trading at $25 per share. Firm D has a market value of $100 million and the stock is trading at $50 each. Firm C is contemplating acquiring firm D. Firm C’s CFO estimates that the combined firm will be worth $750 million and firm D can be acquired at an acquisition premium of $95 million. If for the outstanding shares of firm D, firm C is willing...

  • Assume that a seven-firm cartel supplies 500 million units of Whatailsya energy drink at a price...

    Assume that a seven-firm cartel supplies 500 million units of Whatailsya energy drink at a price of $5.00 per unit. Each firm supplies an equal share of the cartel's output. One firm decides to cheat and supplies 50 million extra units, causing the price of Whatailsya to decrease to $4.50 per unit. Assuming that the loss due to the fall in price is evenly spread across all firms in the cartel, what is the net gain for the cheating firm,...

  • Assume that an eight-firm cartel supplies 500 million units of Whatailsya energy drink at a price...

    Assume that an eight-firm cartel supplies 500 million units of Whatailsya energy drink at a price of $5.00 per unit. Each firm supplies an equal share of the cartel's output. One firm decides to cheat and supplies 50 million extra units, causing the price of Whatailsya to decrease to $4.50 per unit. Assuming that the loss due to the fall in price is evenly spread across all firms in the cartel, what is the net gain for the cheating firm,...

  • Consider a price-taking firm that has total fixed cost of $500 and faces a market-determined price...

    Consider a price-taking firm that has total fixed cost of $500 and faces a market-determined price of $10 per unit for its output. The wage rate is $175 per unit of labor, the only variable input. Using the following table, fill in the columns and answer the question below. (1) (2) (3) (4) (5) (6) Units of labor Output Marginal product Marginal revenue product Marginal cost Profit 1 10 2 30 3 60 4 100 5 150 6 190 7...

  • 3. Suppose a firm has the production function Q = 50 KL 1) If the wage...

    3. Suppose a firm has the production function Q = 50 KL 1) If the wage rate is $10 per unit of labor and the rental rate of capital is $5 per unit of capital, how much capital and labor should the firm employ in the long run to minimize the cost of producing 40,000 units? 2) Using the solution in part 1), what will the firm’s long-run total cost be?

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT