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    Stock price valuation and IRR question for Berkshire's purchase of GEICO

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    I would like to receive a draft response to the following question which relates to the attached case study. Please show formula and calculation in response.

    'Note the Value Line forecast of dividends (on P20). Value Line's forecasts of a share price of $90 at the low end of the range and $125 at the high end of the range at YR2000. What would Buffet expect the stock price to be at YR2000 to achieve his 28% average annual gain (or IRR) on the GEICO investment in 1995?'

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    Solution Preview

    See attached Excel file.

    I doubt you are able to find the stock price at YR2000 (future value) or to find the reasonable bidding price at 1995 (present ...

    Solution Summary

    The solution forecasts the stock price for the year 2000 based on several factors calculated in an Excel spreadsheet.