Case Question

Topics: Stock market, Berkshire Hathaway, Warren Buffett Pages: 7 (2035 words) Published: July 20, 2011
Warren E. Buffett, 2005 Case Questions: 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? Based on the multiples for comparable regulated utilities, what is the range of possible values for PacifiCorp? What questions might you have about this range? Assess the bid for PacifiCorp. How does it compare with the firm’s intrinsic value? As an alternative, the instructor could suggest that students perform a simple discounted cash flow (DCF) analysis. How well has Berkshire Hathaway performed? How well has it performed in the aggregate? What about its investment in MidAmerican Energy Holdings? What is your assessment of Berkshire’s investments in Buffett’s “Big Four”: American Express, CocaCola, Gillette, and Wells Fargo? From Warren Buffett’s perspective, what is the intrinsic value? Why is it accorded such importance? How is it estimated? What are the alternatives to intrinsic value? Why does Buffett reject them? Critically assess Buffett’s investment philosophy. Be prepared to identify points where you agree and disagree with him. Should Berkshire Hathaway’s shareholders endorse the acquisition of PacifiCorp?

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The Battle for Value, 2004: FedEx Corp. vs. United Parcel Service, Inc Case Questions: 1. Prepare to describe in class the competition in the overnight package delivery industry, and the strategies by which those two firms are meeting the competition. What are the enabling and inhibiting factors facing the two firms as they pursue their goals? Do you think that either firm can attain a sustainable competitive advantage in this business? Why did FedEx’s stock price outstrip UPS’s during the initiation of talks over liberalized air cargo routes between the U.S. and China? Assuming a perfectly efficient stock market, how might one interpret a 14% increase in FedEx’s market value of equity? How have FedEx and UPS performed since the early 1990s? Which firm is doing better? In class, prepare to discuss the insights you derived from the two firms’ financial statements, financial ratios, stock-price performance, and economic profit (economic value added or EVA). Also, prepare to describe how EVA is estimated, and its strengths and weaknesses as a measure of performance. If you had to identify one of those companies as excellent, which company would you choose? On what basis did you make your decision? More generally, what is excellence in business?




Krispy Kreme Doughnuts, Inc Case Questions: 1. 2. What can the historical income statements (case Exhibit 1) and balance sheets (case Exhibit 2) tell you about the financial health and current condition of Krispy Kreme Doughnuts, Inc.? How can financial ratios extend your understanding of financial statements? What questions do the time series of ratios in case Exhibit 7 raise? What questions do the ratios on peer firms in case Exhibits 8 and 9 raise? Is Krispy Kreme financially healthy at year-end 2004? In light of your answer to question 3, what accounts for the firm’s recent share price decline? What is the source of intrinsic investment value in this company? Does this source appear on the financial statements?

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The Body Shop International PLC 2001: An Introduction to Financial Modeling Case Instructions: Please work through the exercises in this case, first using pencil and paper and then using your personal computer. Then follow the directions in the case to make the three-year forecast, and prepare responses to the questions posed at the end of the case.

Coke versus. Pepsi, 2001 Case Questions: 1. What is EVA? What are the advantages and disadvantages of using EVA as a measure of company performance? 2. Please examine the historical performances of Coca-Cola and PepsiCo in terms...
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