Warren Buffet Case Solution

The major dilemma at hand is avoiding a takeover. The economy was bad at the time, and the company's stock price was thought to be undervalued, as their low P/E ratio of 13.3 indicated. Management needs to find out why their stock price is so undervalued.

3. How do the various features of the BW/IP buyout affect the company’s decisions about long-horizon opportunities such as the UCP acquisition?

Warren Buffett and other famous investors have spoken out about their dislike of the EBITDA standard. Buffett in particular wrote about the financial metric within his 2000 and 2002 annual reports to Berkshire Hathaway shareholders: (Hargreaves,

a) In the first set of calculations, the staff used a discount rate of 20%, a five-year time horizon, and ignored taxes and terminal value. What is the relative attractiveness of these three alternatives?

4. The case indicates that the company’s “market value” of equity at June 30, 1999 was $460 billion. Compare this to the company’s “book value” of equity. What factors likely explain the difference between these two values?

What is the implied average collection period for the end of March? For the end of June?

A) What is the possible meaning of the changes in stock price for GEICO and Berkshire Hathaway on the day of the acquisition announcement?

In order to assess whether the accounting profit is a measure of the true profit it must first

Here, the discussion should shift to an analysis of Berkshire’s general record, its experience with MidAmerican, and its experiences buying equity positions in the Big Four. The general conclusion will be that Buffett has done very well as an investor and as the manager of Berkshire.

Assessing the likelihood of each option and assigning weight to each possibility is an inexact science, but I believe it in unlikely that in the current political climate we will not see both a reduction in the tax rate and an increase in the length of time over which we are required to depreciate capital assets. I have assigned weights to each option with this in mind, and have come up with an average weighted estimate of the net present value of the investment of: $1.7 million.

A) What is the possible meaning of the changes in stock price for GEICO and Berkshire Hathaway on the day of the acquisition announcement?

4. Consider the Worldcom-MCI merger and the Qwest-US West merger. Trying to avoid hindsight bias, should the board of MCI and US West have accepted these offers? What is the obligation to shareholders? Was that obligation fulfilled? What about WorldCom and Qwest? Did their shareholders benefit?

In regards to investing in stocks, bonds, currencies, or other investment products, it has always been a normal emotion to be happy when a stock price rose and upset when a stock price fell. Yet for Warren Buffet and his team at Berkshire they welcome these declining prices because of the opportunities it brings. According to Warren Buffet, a true investor would be buying stocks and businesses for their entire life, and “with these intentions, declining prices for businesses benefit us, and rising prices hurt us.” Understanding that the investor is going to be a buyer for eternity an investor should

Buying out a partner from a company has to reflect the current and potential viability of any company. This means that the Peterson and Scott have to evaluate the company to come up with the asking price to present

The previous 959.6m Amoco shares will convert into 633.336m shares of BP ADS equivalent, with the previous 965.6m ADS shares, BP shareholders will take part 60% of the new company, still have majority control over the firm. In this deal, we paid for about 20% premium, which is quite standard and normal. Because synergies from revenue and chemical divisions’ combination are not estimated nor not expected to bring benefit, the main synergy from the merge is 2 billion dollars saving of pretax operating cost. The value we create for our shareholders is $14,840.06 million (Amoco stand-alone value $46,430 million+ synergy $2 billion – price paid for Amoco $33,538.94). But this number is quite sensitive to a lot of factors, such as future energy demand, oil and gas price, industry growth potentials, ultimately affecting Amoco’s stand-alone and synergy valuation. Please