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Interesting brainteaser. It still seems to me that if you assume Berkshire's pre-tax earnings are growing at a certain rate forever, and apply a perpetuity formula to get the multiplier, the same multiplier ought to apply to the government 35% share and Berkshire's 65% share. Both pieces continue to grow at the same rate forever. Each year the government's take increases, but so does Berkshire's at the exact same rate. So I would still argue that the multiplier "ought to be" the same for both pieces.

I don't think you're right. If Buffett called you up tomorrow and told you that you, and you alone, would hereafter receive a 100% dividend (100% of earnings) on your Berkshire stock but no other shareholder would receive one until policy changes, don't you think your shares would suddenly be worth more (and thus a bigger multiple to earnings) than everyone else's shares? That's the government's situation, and their ownership is clearly worth a higher multiple of earnings on that factor alone.

It's important to keep in mind that the prepetuity formula only works if you avoid double counting expected cash flows. The most common way to do this is to use an assumed future growth rate in the denominator that is generated by reinvestment of the supposedly free cash flow you are using in the numerator. If earnings are retained to produce the assumed growth, theyaren't free and you have to adjust the covnentional formula to account for the expected reinvestment. The government need not do this because it gets to have birds in its hands and in the bush. I don't think it's debatable that the government's ownership of Berkshire is worth a significantly greater multiple of current earnings than the shareholder's ownership as long as Berkshire (or any company) continues to retain shareholder's earnings.
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