fin645 module 4 discussion latest 2017

Week 4 discussion

DQ1 19 December 2000 an article appeared in The Wall Street Journal discussing stock price declines that followed share repurchases made by AT&T, Intel, Microsoft, and Hewlett-Packard. The article mentions that Warren Buffett, chairman of Berkshire Hathaway, criticized firms that engaged in share repurchases. In a letter to shareholders, Buffett noted that share repurchases made sense during the mid-1970s, when many stocks traded below their intrinsic value. However, he argued that conditions changed during the bull market of the 1990s, even though share repurchases had become much more frequent. He also suggested that the motivation for share repurchases had also changed, and that during the 1990s firms bought back their shares in order to pump up their stock prices. Discuss Warren Buffett’s views.

DQ2 Please watch the following video and discuss.

Link:https://www.ted.com/talks/dan_ariely_on_our_buggy_moral_code

DQ3 Imagine that you are a divisional manager. Currently you are a member of a committee which is considering two product investments proposed by two other divisional managers: Joe and John. While walking over to the presentations, Joe seems rather arrogant. He mentions that he golfs with the CEO, is a key player in the firm, and that you could really learn a lot from him. In thinking over the projects after the presentations, you find you are really leaning toward John’s proposal even though the projects are quite similar in terms of estimated cash lows and risks. How can you explain this?