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Read: Case One in our textbook, “Warren E. Buffett, 2005” found on pages 3-22. Before reading! Study the following questions and prepare your answers to them as your reading progresses. Remember as you were told in class to study all the exhibits attached to the case before reading any of the text. By the time you have finished examining the exhibits, you should have developed insight into the answers to the questions below. Make a decision! Come to class with your own answer to Question 8 below. You may change your mind later in light of the class discussion or at any time. “A wise man changes his mind. A fool never does.”

It is important to know what you think and to be decisive. 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 $2.55 billion gain in Berkshire’s market value of equity imply about the intrinsic value of PacifiCorp? 2. 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? 3. Assess the bid for PacifiCorp. How does it compare with the firm’s intrinsic value? Perform a discounted cash-flow (DCF) analysis of PacifiCorp.

4. How well has Berkshire Hathaway performed? How well has it performed in the aggregate? What about its investment in MidAmerican Energy Holdings? 5. What is your assessment of Berkshire’s investments in Buffett’s Big Four: American Express, Coca-Cola, Gillette, and Wells Fargo? 6. 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? 7. Critically assess Buffett’s investment philosophy. Be prepared to identify points where you agree and disagree with him. 8. Should Berkshire Hathaway’s shareholders endorse the acquisition of PacifiCorp?