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Warren E. Buffett is an extremely successful investor and CEO for Berkshire Hathaway Inc. and considering this was his largest deal since 1998, the second largest in his entire career, the acquisition of PacifiCorp renewed public interest in Buffett. Buffett's investments are based on the intrinsic value of a company, he says, "intrinsic value is all important and is the only logical way to evaluate the relative attractiveness of investments and businesses" and he also says maximizing Berkshire's average annual rate of gain in intrinsic business on a per-share basis is their long-term economic goal which gives the investors the belief that the acquisition will be very beneficial to the company. These beliefs could possibly be the cause for the $2.55-billion gain in Berkshire's market value of equity, which implies the intrinsic value of PacifiCorp must be very favorable.
MidAmerican is purchasing PacifiCorp from Scottish Power plc for $5.1-billion in cash and $4.3-billion in liabilities and preferred stock for a total of $9.4-billion. Based on the multiples for comparable regulated utilities the range of possible values for PacifiCorp is from about $3.4-billion to $5.9-billion. The purchase bid compared to the implied intrinsic value of PacifiCorp is considerably larger, once again showing that Buffett believes the possible return on the investment will be well worth the risk. Buffett assesses intrinsic value as the present value of future expected performance and says it's the discounted value of the case that can be taken out of a business during its remaining life. He uses the gain in intrinsic value to measure performance not accounting profit because he says doesn't like to measure performance by its size but by per-share progress. He also argued that he should use a "risk-free" discount rate in determining intrinsic values because he avoids risk, saying that his firm focused on companies with predictable and stable earnings.
suppose that the current market price of vcrs is 300 that average consumer disposable income is 30000 and that the
Applying Overhead; Cost of Goods Manufactured The following cost data relate to the manufacturing activities of Black Company during the just completed year:
How much would you pay an insurance company now for an annuity product that will pay you $450 a month for the next 10 years, and the current interest rate is 7 percent.
You have a portfolio with a beta of 2.29. What will be the new portfolio beta if you keep 30 percent of your money in the old portfolio and 70 percent in a stock with a beta of 2.54?
Interest on a note receivable typically is due along with the face value at the note's maturity date. If the end of the accounting period occurs.
Do you feel that the financial markets play any role in financing, instigating or creating wars among nations in the modern world? If yes, give some examples.
Explain three similarities of both future and forward currency contracts and three major differences of both future and forward currency contracts.
What are the advantages to a home buyer of a graduated payment mortgage?- What is the major constraint on lenders in setting new interest rates for an adjustable rate mortgage?
a. What is the project's payback period (to the closest year)? b. What is the project's discounted payback period? c. What is the project's NPV? d. What is the project's IRR? e. What is the project's MIRR?
Why is the investment appraisal process so important? The concept of relevance applicable to the determination of the project's cash flows stating all assumptions made. What are the criticisms of the methods used in the investment appraisal process
the fact that she is providing no collateral, the bank is going to charge her a fee of 2.0% of her loan amount as well as take out the interest upfront. The bank is offering her 16% APR for six months.
If most investors expect the same cash flows from Companies A and B but are more confident that A's cash flows will be closer to their expected value, which company should have the higher stock price? Explain.
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