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Van Nguyen, CFO of a new listed firm in the telecommunications industry, is keen to acquire one of its competitors, Teletom, for $18.00 per share,
Van Nguyen, CFO of a new listed firm in the telecommunications industry, is keen to acquire one of its competitors, Teletom, for $18.00 per share, a 20% premium over its current market price. Van justifies the premium using price-earnings analysis: Our price-earnings ratio is 25, and using forecast earnings of Teletom of $1.00 per share, I value Teletom at $25.00, which is well above our offer price. Do you agree with Vans analysis? Explain your reasoning carefully.
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