Afterpay Limited (APT) recently reported its earnings. "The 922 per cent rise in the companys value since late March is so ridiculous that there were no numbers. Afterpay chief executive Anthony Eisen and co-founder Nick Molnar could have produced on Thursday that would in any way justify its $25.4 billion market cap" (Australian Financial Review, Aug 27, 2020). Does this quote necessarily indicate that Afterpay is over-priced?

Select one:

a.

Yes, since we use multiples of market values to fundamentals in order to understand the valuation of firms.

b.

No, since the market capitalization reflects future prospects and the realized earnings do not capture the growth prospects of the firm.

c.

Yes, since all firms where the market value is greater than per share accounting fundamentals are over-priced.

d.

Yes, since firms in other industries have lower market capitalizations relative to fundamentals.

e.

Yes, since the market capitalization reflects future prospects and the realized earnings capture the growth prospects of the firm.