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.