21 Jun Finance case study. You have to do the CASE 1: WARREN
Finance case study.
You have to do the CASE 1: WARREN BUFFETT from attachment. The case is in page 54 to 73.
In this case, you are going to do a qualitative evaluation of the decision to acquire PacifiCorp. You don’t have to do any calculations, but use the all the data and numbers given in the exhibits. Your case report should include analysis and answers to the following:
- 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 $2.55 billion gain in Berkshire’s market value of equity imply about the intrinsic value of PacifiCorp?
- Based on the multiples for comparable regulated utilities, what is the range of possible values for PacifiCorp? What questions might you have about this range?
- Assess the bid for PacifiCorp. How does it compare with the firm’s intrinsic value? As an alternative, the instructor could suggest that students perform a simple discounted cash-flow (DCF) analysis.
- How well has Berkshire Hathaway performed? How well has it performed in the aggregate? What about its investment in MidAmerican Energy Holdings?
- What is your assessment of Berkshire’s investments in Buffett’s Big Four: American Express, Coca-Cola, Gillette, and Wells Fargo?
- From Warren Buffett’s 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?
- Critically assess Buffett’s investment philosophy. Be prepared to identify points where you agree and disagree with him.
- Should Berkshire Hathaway’s shareholders endorse the acquisition of PacifiCorp?
Be sure to read the case very carefully. Read all footnotes, endnotes, tables, exhibits, etc. This requirement applies to all case studies. Try to determine what all the numbers are telling you about the valuation of the company and the purchase price.
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