Warren E. Buffett Case

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David L. Ward Warren E. Buffett Case Finance 4400 Spring 2012 1. Do a simple valuation of PacifiCorp and to consider the reasonableness of Berkshire’s offer. A. The Valuation of PacifiCorp reasonableness of Berkshire’s offer first should look if the company is paying dividends or not. PacifiCorp is a privately held company that does not pay a dividend. I cannot use the dividend discount model because there is not enough information to do so. I will look at an implied valuation for the firm using multiples from comparable regulated utilities. In case Exhibit 9, I can show some financial data for the PacifiCorp (see W1), and in case Exhibit 10 I can get the implied valuations for PacifiCorp (see W1) using averages and medians of the company. B. PacifiCorp W1 | Shares | Total assets | Total liabilities | Cash & equiv. | Net debt | Net income | 312.18 | $12,521 | $9,144 | $199 | $3,700 | $252 | Book Value | EPS | Rev | Net Income | EPS | Book Value | $3,377 | $0.81 | $6,584 | $7,553 | $4,308 | $5,678 | C. Berkshire Hathaway’s market value increased $2.55 billion this indicates an expected benefit to Berkshire from the acquisition. This shows to be equity divided the extent of this benefit as a gain of $2.55 billion. The division by PacifiCorp’s 312.18 million shares outstanding or $6.95 per PacifiCorp share more than Buffett is paying indicates this is a good transaction. Berkshireis offering $5.1 billion in cash for PacifiCorp’s equity, for a per-share price of $16.34; altogether, this is a per-share expected value for PacifiCorp’s shares of $23.29. This a fair estimate of PacifiCorp’s intrinsic value, as is shown below. D. Summary of PacifiCorp valuation estimates | Enterprise Value as Multiple of: Net Rev EBIT

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