Warren Buffet Case.

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> Insurance (GEICO, General Re.)

> Apparel (Fruit of the loom)

> Building Products (Acme Buildings brands)

> Finance and Financial products

> Flight Services (Flight Safety, NetJets)

> Retail

> Grocery Distribution

> Carpet and Floor covering

He was the first exposed to formal training in investing at Columbia University where he studied under the professor Benjamin Graham. Over the years, buffet had expounded his philosophy of investing in his chair person’s letter to the shareholders in Berkshire Hathaway annual report. The letter emphasized the following elements:

Economic reality, not accounting reality: investment decision should be based on the economic reality of a business. In the economic reality the intangible assets are valuable, yet under the GAAP, GAAP measure results in terms of net profit; in economic reality, the results of a business were its flow the cash.

The cost of the lost opportunity: Buffett compared an investment opportunity against the next best alternative. In his business decisions, he demonstrated a tendency to frame his choice as either/or decision rather than yes or no decisions. For Buffett the comparison of an investment against other returns available in the market that was an important benchmark of performance.

Value creation: time is money: Buffett assessed intrinsic value as the present value of the future expected performance: an investor is indeed buying something for what it is worth and is therefore truly operating on the principle of obtaining value of his investments.

Measure performance by gain in intrinsic value, not accounting profit: the gain in intrinsic value could be modeled as the value added by a business above and beyond the charge for the use of capital in that business. Those measure focus on the ability to earn returns in excess of the cost of capital.

Risk and discount rates: Conventional academic and practitioner thinking held that the more risk one took, the more one should get paid.

Diversification: Buffett disagreed with conventional wisdom that investors should hold a broad portfolio of stocks in order to shed company-specific risk. In his view, investors typically purchased far too many stocks rather than waiting for one exceptional company.

Investing behavior: Should be driven by information, analysis, and self-discipline, not by emotion or "hunch". Buffett used this allegory to illustrate the irrationality of stock prices as compared to true intrinsic value.

Alignment of agents and owners: A managerial "wish list" will not be filled at shareholder expense. We will not diversify by purchasing entire businesses at control prices that ignore long-term economic conse­quences to our shareholders. We will only do with your money what we would do with our own, weighing fully the values you can obtain by diversifying your own portfolios through.

CONCLUSION OR DECISION

We conducted the conclusion that shareholders would be willing to support the acquisition. From the advantage of diversification, the total portfolio risk is reduced. Invest a lot of money generates many risks, but if you study well what you're doing this kind of work will generate more profits, PacifiCorp is a leading company of low-cost energy producer in the western United States, we saw in the case that the net income of PacifiCorp is high among the competitors. MidAmerican would get stable revenue from this acquisition. However, according to the Berkshire Hathaway’s earnings before taxes figure in 2004, which is $7.44 billion, we cannot ignore that the $9.4 billion is not a small amount.

In the end we calculated a gain in market value of Berkshire Hathaway is $2.55 billion. Buffet is willing to pay $5.1 billion cash to PacifiCorp. The number of share outstanding in PacifiCorp is 312.18 million.

BIBLIOGRAPHY.

Case Studies in Finance managing for corporate value creation seventh edition.pdf. (2016). Retrieved August 9, 2016, from http://doc.mbalib.com/view/b36e1f3f24848b78060484e6e9c99528.html

The Essays of Warren Buffett : Lessons for Corporate America, Warren Buffett and Lawrence A. Cunningham, The Cunningham Group; revised edition (April 11, 2001), ISBN 978-0-9664461-1-1

The Essays of Warren Buffett: Lessons for Corporate America, Second Edition, Warren E. Buffett and Lawrence A. Cunningham, The Cunningham Group; 2nd edition (April 14, 2008), ISBN 978-0-9664461-2-8