Therefore if we can buy stock in a wonderful public business at a private

# Therefore if we can buy stock in a wonderful public

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Therefore, if we can buy stock in a wonderful public business at a private business Payback Time price, then we’re getting a heck of a Margin of Safety. BNI’S MARKET-CAP PAYBACK TIME So with that in mind, let’s see what happens when we look at a public business without adding in any value for liquidity—in other words, we’ll
4. Add it up. Is it more than the \$17,680 million we are thinking about paying? Yes. In 5.5 years we’ve got our money back. Saaaaah … weeeeeet! We’ve got a Payback Time that’s right in there with private- equity deals. Wow! FIGURING OUT EARNINGS GROWTH THROUGH THE YEARS Calculating earnings growth through the years is easy. We start with net earnings of \$2,115 million if we buy today (year 0). We grow it at 12 percent in year 1 (0.12 × 2,115 = 254. Remember, we decided on 12 percent growth for BNI earlier in the chapter. Add that to \$2,115 million and we arrive at \$2,368 million for year 1). Now do it again: 0.12 × \$2,368 million = \$284 million. Add that to \$2,368 million and we get \$2,653 million for year 2. And so on. Eventually you’ll see that you surpass the Market Cap for this company midway through year 5—so you can stop there. If you’re looking for a shortcut, my website also has a free Excel spreadsheet template, as well as a free tool designed to do Payback Time analysis.

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• Spring '20
• Warren Buffett

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