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Theoretically, the price of stock should reflect the net present value of the future flow of dividends utilizing a risk adjusted discount rate. Nevertheless, certain
Theoretically, the price of stock should reflect the net present value of the future flow of dividends utilizing a risk adjusted discount rate. Nevertheless, certain stocks such as Google have phenomenal price to earnings ratios. Discuss why the price-to-earnings ratios are so high and what the justification may be for their stock prices. Comment on: High stock prices reflect higher earnings growth. Some believe the stock prices are unrealistic and rely on the bigger fool theory. Recall the tech bubble bursting after March 2000.
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