No. of Recommendations: 1
Buffett has said that the intrinsic value of a company is the "discounted value of the cash that can be taken out of a business during its remaining life." If you use 4.6% as the discount rate, and 8% as the growth rate for Berkshire's earnings, and assume that the P/E multiple is the same in 10 years, you get a present value of $549. Using a 5% growth rate, you get $415. That seems like a reasonably conservative determination of the lower bound of what we expect from Berkshire.
DTB
I like your PV of $549! :) Could you advise what you used as the starting point for the growth rate of earnings. There has been such a variation over the last 5 years, I am wondering about the starting input value.
Thanks
Aussi
