Homework: Stocks & Warren Buffett's 2023 Letter to berkshire shareholders FED FUNDS A0.50% 075-1% PED INVASION OF UKRAINE LIKELY WEIGHS ON ECON ACTIVITY Part A: Stocks 1. McDonald's Corporation (NYSE: MCD) is paying a dividend of $6.08. Calculate the value of the stocks using the constant growth model formula, according to the assumptions in the questions below and then compare your results with the current price of the stock (Visit finance.yahoo.com and look for MCD's stock price) and say if you should invest in the stock or not: a) Discount Rate: 8%, Growth Rate: 6%. Should you invest? Why? b) Discount Rate: 8%, Growth Rate: 3%. Should you invest? Why? 2. Alphabet Corporation (NASDAQ: GOOG) has an EPS of $4.96. Calculate the value of the stocks using the Benjamin Graham formula, according to the assumptions in the questions below and then compare your results with the current price of the stock (Visit finance.yahoo.com and look for Goog's stock price) and say if you should invest in the stock or not: a) b) Discount Rate: 4%, Growth rate: 3%., Should you invest? Why? Discount Rate: 4%, Growth Rate: 6%, Should you invest? Why? 3. First Republic Bank (NYSE: FRC) has an EPS of $6.10 and a dividend of $1.08. Calculate the value of the stocks using the Benjamin Graham formula and the constant growth model formula, according to a Discount Rate: 8% and estimated Growth Rate: 2%. Compare the results obtained using the two formulas and also compare them with the current price of the stock (Visit finance.yahoo.com and look for FRC's stock price) and say if you should invest in the stock or not based in the result of each of your calculations (with the BG's formula and CGM's formula). Part B: WB Letter Read WB's letter and answer the following questions: 1) How does the concept of market efficiency described in textbooks differ from the reality of the behavior of marketable stocks and bonds, according to Warren Buffet? Cite the paragraph where he talks about this in his letter. 2) What is Berkshire's secret sauce according to Warren Buffett's 2023 letter? 3) How do share repurchases impact a company's intrinsic value, and why does Warren Buffett emphasize the importance of value-accretive repurchases? Provide examples from Berkshire Hathaway, Apple, and American Express to support your answer. 4) According to Warren Buffett, why are claims that all share repurchases are harmful to shareholders or to the country unfounded? Using the example of a local auto dealership and its three shareholders, explain how a value-accretive share repurchase can benefit all parties involved. 5) From Charlie Munger's thoughts, please pick your favorite and explain why you like it.