Case Study for Buffett

Case #1: Warren Buffett

1. What does the stock market seem to be saying about the acquisition of PacifiCorp by Berkshire Hathaway?

Stock price is high

2. Based on your own analysis, what do you think PacifiCorp was worth on its own before its acquisition by Berkshire?

Sharehold equilty 11billion

5.1billion for the equity

2.6billion

7.7 billion 312m exhibit9 price $23.20

Twelve to eighteen months

Calculate the discount rate

Rf+B*(Rm-Mf)

5.76%+7.5*(10.5%-5.76%)=9.3%

PV=C/(1+r)^n=5.1/(1+0.093)^1=4.7billion

Reasonable

3. Assess Buffett’s track record. Do you think he has a history of overpaying?

a. Use Excel and try calculating the IRR (internal rate of return) on his investment in MidAmerican Energy Holdings found in Exhibit 6.

1.6million

Long term not overpaying present very well In the exhibit 3 it shows that it has changed from 9.056billion to 37.717 billion which is increased by 4 times.

4. Take a look at Buffett’s investment philosophy found in page 6 to 11. What do they mean to you, and do you agree with them?

5. Do you think the PacifiCorp acquisition is a good or bad deal? ….Let’s fast-forward and assume that the industry valuation multiples found in Exhibit 10 still hold true today. Take a look at page 160 in Berkshire Hathaway Energy Co.’s 10-K (pdf file). What does that imply for PacifiCorp’s Enterprise Value today?