Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
12 Cards in this Set
- Front
- Back
|
(1) Warren Buffet Case |
Warren Buffet would purchase Pacificorp for almost $10b. |
|
|
(1.1) Warren E Buffet - What does the stock market seem to say about theacquisition of PacifiCorp by Berkshire Hathaway? Specifically, does the dealcreate value? If so, for which party? What does the $2.55 billion increase inBerkshire Hathaway’s market value represent? |
Synergy: Revenue enhancement | Strategic Cost reduction | Econ. of Scale + Centralization Tax gains | Subsidiary Payments Reduced capital requirements | Experience |
|
|
(1.2) Warren E Buffet - What do you think PacifiCorp is worth on itsown before its acquisition by Berkshire? Which valuation method should youuse to value PacifiCorp and why? Show clearly the steps to arrive at thefollowing estimates in Exhibit 10. |
The mean is the best valuation because the median is volatile due to the lower sample size and there are no significant outliers. Other Valuation Tools: P/E, Multiples, DCF |
|
|
(1.3) Warren E Buffet - How do you assess the bid for PacifiCorp by BerkshireHathaway? How much does Buffett pay for PacifiCorp for its equity and as awhole? How do these values compare with the firm’s intrinsic valuesestimated in Exhibit 10? |
Apparently at discount, but expected to generate considerable cash flows with good ROI. |
|
|
(1.4) Warren E Buffet - Evaluate Berkshire Hathaway’s investment inMidAmerican Energy Holdings in 2000. Using the information from Exhibit 6,calculate the net gain to Berkshire Hathaway in 2000 dollars. |
BH is therefore expected to make a return of $8.60 billion the total investment of $1.64 billion. |
|
|
(1.5) Warren E Buffet - Discuss Berkshire Hathaway’s business strategy during1965-2004. How well did Berkshire Hathaway perform during that period? |
Initially purchased insurance companies to fund further acquisitions. Following additional acquisitions in the 1970’s and 1980’s BH exited the textile business in 1985.It could therefore be argued that between 1965 and 2004 the long term operational strategy wasto transform BH from a textile producer to an insurer and ultimately an investment vehicle.
|
|
|
(1.6) Warren E Buffet - Assess Berkshire’s investment in Buffett’s Big Four:American Express, Coca-Cola, Gillette, and Wells Fargo. |
As a whole the portfolio of the BiG Four achieved a return of 15% increasing its initial equity value from $3.83 billion toapproximately $24.7billion. |
|
|
(1.7) Warren Buffet - Critically assess Buffett’s investment philosophy.Identify the points where you agree and disagree with him. |
Buffet’s almost arrogant view of risk appears to offer little tangible benefit for the average risk adverse investor. |
|
|
(2) Flinder Valves and Controls (FVC) and RSE |
A merger between RSE and FVC is under investigation. |
|
|
(2.1) FVC/RSE - SWOT analysis: Using the case and the supplementary data in Appendix 1,how do you see FVC’s situation? What are the strengths, weaknesses,opportunities, and threats of FVC and RSE? Why should these twocompanies want to negotiate? |
asg |
|
|
(2.2) FVC/RSE - Strategy: What options (besides agreeing to the deal) does each party to thetransaction have? What is the best alternative to a negotiated agreement(BATNA) of each company? |
asfh |
|
|
(2.3) FVC/RSE - |
aga |
