In 2009, Warren Buffett announced that Berkshire Hathaway would acquire all of the 341 million outstanding shares of Burlington Northern Santa Fe (BNSF) railroad for $100 per share, a large premium from the current price. BNSF reported shareholders' equity of $12,798 million in its most recent annual report, with $9,135 million in net financial obligations that Buffett would assume. The corresponding numbers for the prior year were $11,131 million and $9,155 million. The income statement reported $14,016 million in revenue for the year that translated into $2,113 million in after-tax core operating income.

a. On the basis of the current numbers, do you think the $100 per share bid can be justified? What growth rate is implied in the price? (Experiment with "reasonable" estimates of Buffett's required return.)

b. What might Buffett see to justify paying $100 per share?