The case offers a range of evidence about shareholder wealth creation

at Berkshire Hathaway. The case gives a rate of 24% compound

annual growth in stock prices from 1965 to 1995. Berkshire Hathaway
has perform very reasonably well. The company had an average of
20.3% annual growth. It can be seen that Berkshire’s year end closing
share price was $102 in 1997 and on May 24, 2005 the share price
reached $85,500 which had one of the highest on the stock exchange.
This is the significant growth over the years. Data in the case and case
Exhibit 6 give information with which to perform a simple analysis of
Berkshire’s return on investment in MidAmerican. Beginning in
2000, Berkshire Hathaway made an outlay of $1.642 billion for an
eventual 80.5% economic interest in MidAmerican. Berkshire’s
economic interest in MidAmerican was composed of both equity and
debt investments such that the cash flows to Berkshire included
interest payments, common dividends, and preferred dividends.
Therefore, MidAmerican’s free cash flows, the cash flows available to
all debt and equity claims. With regards to the investment in
MidAmerican Energy Holdings, they experienced a loss of revenue in
2004 as it fell to 170 million while the prior year they had revenue of
416 million. Therefore it can be expected that the acquisition of
PacifiCorp will increase the revenue in the next year.

Berkshire’s invested $3.83 billion in the “Big Four” companies in

multiple transactions between May 1988 and October 2003. The big
four companies consist of American express, Coca-Cola, Gillette, and
Wells Fargo. In Exhibit 3 we see that in 2005 American Express had
an annual average total return of 17% and a market value of $8.546
billion. Berkshire Hathaway owned 12.1% of the company and the
cost of investment was 1.470B. Berkshire owned 8.3% of shares to
the coca cola company. Coca cola’s market was 8.328 billion and had
an average rate of return of 16%. Berkshire paid 1.299 billion
investment. Berkshire owned 9.7% of Gillette Company. Gillette’s
market share was 4,299 billion and the average rate of return 9.7% of
Gillette Company. Gillette’s market share was 4.299 billion and the
average rate of return was 14% Berkshire invested 600 million in the
company. The final company is Wells Fargo. Berkshire owns 3.3% of
the company. Wells Fargo market value is 3.508 billion and had an
average rate of return of 1.3%. Berkshire invested 369 million. Since
Berkshire has invested 3.84 billion in the four companies, the
combined share values for the four companies is $24,681 billion. That
is a significant in their investments and all four companies are holding
a steady market share and average rate of return. I would say
Berkshire made a solid investment that is providing good on their
investment.