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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 170.58-0.2%12:01 PM EST
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To: Wyätt Gwyön who wrote (111883)1/30/2002 8:51:44 AM
From: Wyätt Gwyön  Read Replies (1) of 152472
 
i was asked about the Buffett quote via PM, so just to clarify...

i believe what Buffett means is that, if you have a 500BB market cap AND want a 15% return in perpetuity, you need to make:

a. 75BB starting this year and every year thereafter (you don't need to make more than 75BB in subsequent years, since each 75BB is still a 15% return on the original 500MM); OR

b. 1.15*75BB (=86.25BB) starting next year and every year thereafter (now 15% more money is required in order to equal out to a 15% annual return, since no money was paid for a year); OR

c. 1.15*86.5BB (=99.19BB) starting two years from now and every year thereafter; etc.

if you could be assured of a, b, and c, then presumably they would all have the same NPV.

i believe Buffett's point in all this is to illustrate the ridiculous profit growth one must assume in order to expect a 15% return in his example.
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