Section 1
Provide a per-share valuation for Berkshire Hathaway. You should provide three different estimation methods and comment on each result.
1. Market Value (3 Marks)
2. Book Value (3 Marks)
3. A valuation based on a discounted cashflow model (Gordon Growth Model) (9 Marks)
You are also required to estimate the Weighted Average Cost of Capital (WACC) for the firm. I would recommend that you choose a company for whom it is easy to get information. Through the assignment, please provide comment and communicate your approach, thinking and assumptions. In estimating the
WACC you should incorporate the following:
Cost of Equity (10%)
CAPM
β’ πΎπ = π
ππ πππππ π
ππ‘π + π΅ππ‘π π₯ (π
ππ‘π’ππ ππ ππ‘πππ ππππππ‘ β π
ππ ππππ πππ‘π)
Cost of Debt (5%)
Estimation of final WACC figure including weights (5%)
Presentation of Information (5%)
key findings.
General Discussion (10%)
Discuss your results. You should include the strengths and weakness of the approaches and the potential uses of the WACC.
Length
Maximum 3 page answer, size 11, 1.15 line spacing.
Section 2
Topic β Dividend Policy 1000 words
Different views have been expressed as to whether a firm can increase its value by adjusting its
corporate pay-out policy. You are required to express a view on this topic that is based on the
underlying financial theories and which makes use of the academic literature. You may also
refer to case study or real world examples to support your view.
