Question: Consider the following statements: Statement 1: As long as a company's ROE is greater than the cost of capital, the intrinsic value estimate from the

Consider the following statements:

Statement 1: As long as a company's ROE is greater than the cost of capital, the intrinsic value estimate from the residual income model will be greater than the stock's current book value. Statement 2: Tobin's q equals the market value of the company's debt and equity divided by the replacement cost of the company's assets.

Which of the following is most likely?

Select one: a. Only Statement 1 is incorrect. b. Only Statement 2 is incorrect. c. Both statements are incorrect.

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