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Technology Stocks : Warren Buffett

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To: shean bond who wrote (33)	1/8/1997 4:09:00 AM
From: Murti Gajjala	of 82

Shean, The way I look at is I have x # of $ today. I want to make a decision if to buy a stock based on my estimate of present earnings, future growth in earnings and their present worth of ALL future earnings combined and compare with what I might invest. If this is the objective, my calculations make sense. This is what a reasonable person should do and of course he should also take in to account the risk (uncertainity) in the projection of earnings (due to various reasons) involved. 1. In your first set of calculations, you are assuming that there is no growth in earnings and comparing with the result in in the 2nd set considering growth. This comparison is between apples and oranges and so in my opinion can not be made. 2. In your first set and second set, you are capitalizing 1998 and future earnings and then discounting the value to 1997. In doing so, you are assuming that there are NO 1997 earnings. Why you are assuming no 1997 earnings? It seems to me that you are using standard formulae without looking in to the rationale behind them. Murti

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