Warren Buffet: Man of Principle

Warren Buffet is a man of principle. He does non believe in risk. He avoids it by using a set of investment guidelines that help him engage up the best decisions. He minimizes his probable for risk by using a throw out rate that is based on the 30 year US Treasury when trying to determine the success or potential failure of a Berkshire Hathaway investment. In 1995, Warren Buffet utilize a 6.86% 30 year Treasury bond to address his risk NPV of his initial investment in GEICO. See the tables to a lower place: CashDiscountNPV Year 01995 purchase-$2,300.001-$2,300.00 Year 11996 dividend $1.16$39.060.94$36.72 Year 21997 dividend $1.25$42.090.88$37.04 Year 31998 dividend $1.34$45.120.82$37.00 Year 41999 dividend $1.44$48.480.77$37.33 Year 52000 dividend $1.55$52.190.72$37.58 Year 52000 share $90$3,030.000.72$2,181.60 NPV$59.67 By returning a irresponsible NPV of $59.67, a difference of $3 over the original petition price of $55 for the GEICO received, this automatically convinced Mr. Buffet that GEICO was positioned as an ideal candidate for ownership by Berkshire Hathaway Investment. Year 01995 purchase-23001-2300 Year 11996 dividend $1.1639.060.9436.7164 Year 21997 dividend $1.3445.120.8839.7056 Year 31998 dividend $1.5552.190.8242.

7958 Year 41999 dividend $1.7960.270.7746.4079 Year 52000 dividend $2.0769.70.7250.184 Year 52000 share $12542090.723030.48 NPV936.47 But to make sure that his calculations were correct we would have to assume that eventually the stock would rise to $125 per share thereby giving a NPV of $936.47. Either way this investment strategy proved honest for shareholders. Since 1995 GEICO has continued to amaze shareholders by paying average an annual return of 13.5% for company stock holders making everyone financially happy. As far as the acquisition of GEICO and the long term goals of Berkshire Hathaway its a perfect business model for both parties. GEICO... If you want to get a full essay, order it on our website: Ordercustompaper.com

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