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Question 17: A public company, Ambek Inc. is evaluating an acquisition of a private, though still significant firm, Betik Inc. Ambek believes it can buy
Question 17: A public company, Ambek Inc. is evaluating an acquisition of a private, though still significant firm, Betik Inc. Ambek believes it can buy the target for $15.OB. Since the target earned $3.0B in net profit last year, and since Ambek has a trailing PE ratio of 25.0x, the analyst team reports as we are buying the company for $15.0B/$3.0B = 5.0x, and since our (Ambek's) PE ratio is 25.0x, this deal will be immediately accretive and will likely lead to an increase in Ambek's stock price. What is potentially wrong with this argument? (3 points) =
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