Economic Classics

3. The bid for PacifiCorp is $5.1 billion and $4.3 billion in liabilities and preferred stock.

* Firm 's intrinsic value= market value

* = Present value × cost of equity of book value

* PacifiCorp was a leading, low-cost energy producer and distributor that served 1.6 million customers in six states in the western United States. Based in Portland, Oregon, PacifiCorp generated power through company-owned coal, hydrothermal, renewable wind power, gas-fired combustion, and geothermal facilities.

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* It is the financial statement of PacifiCorp:

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4. Berkshire Hathaway was incorporated in 1889 as Berkshire Cotton Manufacturing, and eventually grew to become one of New England’s biggest textile producers, accounting for 25% of the United States’ cotton textile production. In 1955, Berkshire merged with Hathaway Manufacturing and began a secular decline due to inflation, technological change, and intensifying competition from foreign competitors. In 1965, Buffett and some partners acquired control of Berkshire Hathaway, believing that its financial decline could be reversed.

* In 1977, the firm’s year-end closing share price was $102; on May 24, 2005, the closing price on its Class A shares reached $85,500.

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* It is a summary of revenues, operating profits, capital expenditures, depreciation, and assets for Berkshire’s various business segments.

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* Berkshire Hathaway took a major stake in Mid American on March 14, 2000, with a $1.24 billion investment in common stock and a nondividend-paying convertible preferred stock.28 This investment gave Berkshire about a 9.7% voting interest and a 76% economic interest in Mid American.Subsequently, in March 2002, Berkshire acquired another 6.7 million shares of Mid American’s convertible stock for $402 million, giving Berkshire a 9.9% voting interest and an 83.7% economic interest in the equity of Mid American (80.5%...