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Case 1 Questions: Warren Buffet

Case 1 Questions: Warren Buffet - 7,596 4,277 5,904 Mean...

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Case 1: Warren E. Buffett (Discussion date – September 15, 2011) Questions: 1. What is the possible meaning of the changes in stock price for Berkshire Hathaway and Scottish Power plc on the day of the acquisition announcement? Specifically, what does the $2.17-billion gain in Berkshire’s market value of equity imply about the intrinsic value of PacifiCorp? 2. Based on your own analysis, what do you think PacifiCorp was worth on its own before its acquisition by Berkshire? 3. Assess the bid for PacifiCorp. How does it compare with the firm’s intrinsic value? Is Buffett overpaying? Summary of PacifiCorp valuation estimates Exhibit 10 Enterprise Value as Multiple of: MV Equity as Multiple of: Rev. EBIT EBITDA Net Income EPS Book Value Median 6,252 8,775 9,023
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Unformatted text preview: 7,596 4,277 5,904 Mean 6,584 9,289 9,076 7,553 4,308 5,678 4. How well has Berkshire Hathaway performed? How well has it performed in the aggregate? What about its investment in MidAmerican Energy Holdings? 5. What is your assessment of Berkshires investments in Buffetts Big Four: American Express, Coca-Cola, Gillette, and Wells Fargo? 6. From Warren Buffetts perspective, what is the intrinsic value? Why is it accorded such importance? How is it estimated? What are the alternatives to intrinsic value? Why does Buffett reject them? 7. Critically assess Buffetts investment philosophy. Be prepared to identify points where you agree and disagree with him. 8. Should Berkshire Hathaways shareholders endorse the acquisition of PacifiCorp?...
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