Peter Lynch

Here I Go, Criticizing Warren Buffett

I don't get this article at all. Is Buffett not allowed to express his own opinions at all?

Buffett's Big Bet: The Real Value of the Berkshire Investment in Goldman Sachs

>>>Dividend Value

We’ve also got to account for the value of the $500 million a year in dividends. The Net Present Value of those (discounted at a 10% rate) are worth $1.96 billion if it Berkshire holds them for five years.

Preferred Share Value

Finally, we’ve got to take the value of the preferred shares. Goldman has to buy these back at some time or they will be an annual $500 million drain on its annual cash flow and pre-tax profits.

The value of these will fluctuate with general interest rate levels and Goldman’s creditworthiness so it’s tough to put a value on these. But if we take an 8% discount rate, the present value of a $5.5 billion repayment from Goldman in five years (as part of the deal, Goldman has to pay a 10% penalty for buying back the preferred shares) is $3.62 billion.<<<

Your analysis is not consistent. You use a 10% discount rate for the dividend but 8% on the preferred stock value. Why?