Buffet Essays

651 Words Aug 19th, 2012 3 Pages
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?

a. The possible meaning of the changes in stock price is due to the fact that the deal created value for both buyers and sellers; Berkshire was more diversified after the acquisition. The significant change in stock prices for Berkshire Hathaway and Scottish Power plc is partially due to the wide variety of products produced under these names. The approval of these investments and products are indicated by the overall market because they are creating value
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v. EPS median of $4.277 Billion, and a mean of $4.308 Billion. vi. Book value median of $5.904 Billion, mean of $5.678 Billion. b. Question about revenue; The implied value of PacifiCorp is giving impractical results for range of revenue as compared to EBIT, EBITDA, & Net income...

3. How well has Berkshire Hathaway performed? How well has it performed in the aggregate? What about its investment in MidAmerican Energy Holdings?
It has performed very well. Berkshire Hathaway has consistently outperformed the market since its inception in 1965. In 1977 , the firm s year end closing share price was 107 on May 24 , 2005 the closing price on its Class
A shares reached 85 ,500 . Berkshire has had an annual increase of wealth of 24 since 1965, which is more than double the 10 .5 of the average increase for other large stocks. It started out with a decline due to inflation, technological change, and intensifying competition from foreign competitors, but has recuperated well after closing the textile side of their business.
Berkshire Hathaway had recently been performing below S&P500 Index according to Exhibit 1, from April 2005 to May 2005 . Scottish Power had consistently outperformed the S&P500 Index from March to May 2005. This probably was one aspect that attracted Berkshire to purchase PacifiCorp
We believe that it was a good investment . In 2002 they owned 9 .9 of the voting interest and 83 .7 of

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