Part 1: Using Excel, calculate the range of potential values for PacificCorp (using the multiples for comparable regulated utilities) - the core information is provided in Exhibit 10. Prepare a spreadsheet to recreate the values for PacificCorp - show all work, formulas, and values. As hints for helping to complete Part 1, reference the following:
Ac€?c Copy Exhibit 10 into a spreadsheet Ac€?o recalculate all values using formulas
Ac€?c Create the formula to calculate the values for PacificCorp - using the data provided - you are trying to reverse engineer - how was $6,252 (Enterprise Value as a Multiple of Revenue) derived.
Ac€?c NOTE: You are given the answers - I would like you to do the work to derive the values (e.g., use formula to calculate the values).
Part 2: In a Word document, summarize answers to the following questions - your document should be 3-
4 pages (enough to answer the questions thoroughly, but, concise for an executive audience):
1) Describe what Warren Buffet considers "intrinsic value." Why is it accorded such importance, how is it estimated? What alternatives are there to intrinsic value and why does Buffet reject them?
2) Assess the bid for PacificCorp (based on your analysis of the potential values). How does it compare to the firm's values?
3) How well do you think Berkshire Hathaway has performed? What are the criteria for your assessment?
4) If you were a shareholder of Berkshire Hathaway, would you endorse the acquisition of PacificCorp? Why or why not?
see below for exhibit 10 details
|
(dollars in millions) |
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Enterprise Value as Multiple of: |
MV Equity as Multiple of: |
|
MV Equity in $ |
Enterprise Value in $ |
book value in $ |
EPS in $ |
Rev |
EBIT |
EBITDA |
Net Income |
EPS |
book value |
|
| Alliant Energy Corp |
3,333 |
5,600 |
$2,805 |
1.42 |
1.89x |
13.33x |
7.45x |
34.15x |
20.33x |
1.19x |
|
| Cinergy Corp. |
7,989 |
13,231 |
$4,178 |
2.15 |
2.82x |
17.93x |
NA |
32.75x |
19.77x |
1.91x |
|
| NSTAR |
2,898 |
5,287 |
1,484 |
1.78 |
1.79x |
11.62x |
7.53x |
27.83x |
15.25x |
1.95x |
|
| SCANA Corp. |
4,486 |
7,967 |
2,566 |
2.34 |
2.05x |
13.37x |
9.25x |
30.18x |
16.99x |
1.75x |
|
| Wisconsin Energy Corp. |
4,048 |
7,691 |
2,522 |
2.62 |
2.24x |
14.51x |
8.97x |
25.13x |
13.23x |
1.61x |
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| Median |
4,048 |
7,691 |
2,566 |
2.15 |
2.05x |
13.37x |
8.25x |
30.18x |
16.99x |
1.75x |
|
| Mean |
4,551 |
7,955 |
2,711 |
2.06 |
2.16x |
14.15x |
8.30x |
30.01x |
17.11x |
1.68x |
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| Implied Value of PacifiCorp1 |
|
|
3,377 |
0.81 |
6,252 |
8,775 |
9,023 |
7,596 |
4,277 |
5,904 |
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6,584 |
9,289 |
9,076 |
7,553 |
4,308 |
5,678 |
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