From the course: Finance Foundations: Business Valuation

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McDonald's numbers

McDonald's numbers

From the course: Finance Foundations: Business Valuation

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McDonald's numbers

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- To illustrate several simple valuation models, we will use the following information for McDonald's, as of the end of 2011. First their earnings per share, in 2008 it was 3.76, 2009 4.11, 2010 4.58, 2011 5.27. So you see the earnings per share going up a little bit each year, the dividends per share. 2008 1.625, 2009 was 2.05, 2010 was 2.26, 2011 2.53. Again, the dividends are relentlessly going up. Now for simplicity, we will assume that the appropriate risk adjusted discount rate is 15%. Now, don't be deceived by the seemingly casual manner in which we are assuming a 15% interest rate. In any valuation exercise, determining the correct interest rate, given the risk factors associated with a company being valued, is crucial to arriving at a reasonable valuation. Entire courses in finance are devoted, to learning how to properly compute interest rates for use in valuation. Let me tell you a story about interest…

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