Alex Florea

Steven Kahan

Michael Lavin

Eric Xu

Yana Zalukina

Carol Zhou

December 3, 2009

Business OverviewWorld’s #1 fast-food chain by salesCompetitors:

Burger King Holdings, Inc. Yum! Bands, Inc. (KFC, Pizza Hut, Taco Bell, Long John Silver’s, and

A&W ) Wendy’s International, Inc. Doctor's Associates, Inc. (Subway)

Products: Hamburgers Chicken sandwiches and products French fries Breakfast items Salads Soft drinks Desserts

Source: http://www.adamseal.com/Portfolio/?p=261 (Assessed Nov. 15, 2009)

Fact SheetHeadquarters: Oak Brook, Illinois

32,278 restaurants in 118 countries (as of September 30, 2009):

Serves 47 million customers daily

Employs over 1.5 million people

Types of RestaurantsCounter and drive-through servicesLocations:

Stand-alone basis in cities and suburban areasConnected to gas stations/convenience storesShopping mallsWal-Mart storesTruck stops

Features indoor and outdoor playgrounds for children

Business Model25,975 (80.5%) operated by franchisees

and affiliates6,303 (19.5%) operated by the Company Collects from franchisees:

Initial investment feesRoyalties (% of sales)Rent (% of sales)

Supply food and materials to restaurants through approved 3rd parties

Geographical Revenue Breakdown

APMEA: Asia/Pacific, Middle East and Africa

Other Countries and Corporate: includes operations in Canada and Latin America, as well as Corporate activities

Macroeconomic OutlookMcDonald's looks to compete in the high-margin

beverages market with "McCafe”.Separate niches with McDonald's being the better value

proposition and Starbucks offering more of a quality experience.

Strong International Growth is Driving Sales.60% of sales occur outside of the United States.

Changes in consumer preferences could decrease sales.Consumer preferences continue to gravitate towards

more nutritional food.Commodity Costs can Impact Margins.

Since 2005, food prices have increased substantially, but competition has prevented McDonald's from passing costs along to customers. Thus, increasing input prices have come at the expense of margins.

Sensitive to the Dollar.Higher translated value.

Industry OverviewIndustry performance continued to be

battered by economic recession.Society's increasing awareness of the

health risks associated with a high fat, salt and sugar diet.

Total market saturation Intense competitionLow level of concentration

Major Players

SWOT Analysis

5-Year Historical Performance

http://www.google.com/finance?q=mcd; Nov 24, 2009

Recent NewsSep. 24: raised quarterly cash dividend by

10%; (McDonald's has raised its dividend each and every

year since paying its first dividend in 1976)

Oct. 22: third quarter sales in every area of the world increase by around 2%-3%

Nov. 13: Chicago Tribune News (compete in low-price market; lower gross margin at least in a short term period)

Ratio Analysis

McDonald's Corp.              

Compared with Industry

    2004 2005 2006 2007 2008 

Comp. Sales Growth 6.90% 3.90% 5.70% 6.80% 6.90% Very High

Sales per Restaurant 1.56M 1.67M 1.83M 2.40M 2.55M High 

Net Profit Margin 11.94% 12.68% 16.39% 10.53% 18.34% Very High

   

Current ROE 32.90% Average

Current Dividend Yield 3.50%          Very High

Net Profit Margin Comp. Sales Growth

Sales per Restaurant ROE

www.wikinvest.com/stock.mcdonald’s_(MCD); November 30, 2009

Income Statement Assumptions

Forecast

2009 2010 2011-2014

Growth for company-operated sales

-1.00% 2.00% 7.00%

Growth for franchised revenues

2% 10% 12%

cost of good sold % of rev

62% 62% 62%

Growth of SG&A

2% 6% 6%

Income tax rate

30% 30% 30%

WACC Calculation

CAPM ROE

beta 0.61 21.42%

risk-free 3.50%

equity premium 5.50%

CAPM 6.83%

cost of debt 4.11%

Goal Post (40%,60%)

12.41%

Discounted Cash Flow2009E 2010E 2011E 2012E 2013E 2014E

FCF 3,181.70 3,570.74 3,941.22 4,462.02 5,049.50 5,708.95 Terminal Value

FCF Exit Multiple 20.52 117,139.70 Perpetuity Growth 62,471.19

Terminal Value 68,180.14

Discount Rate 12.41%

PV of FCF's 3,181.70 3,176.45 3,118.89 3,141.13 3,162.19 37,982.31 Sum of FCFs 53,762.67

DCF Valuation

 Perpetuity

GrowthExit

MultiplePV of Firm 53,762.67 84,217.81 Less Net Debt 12,052.00 12,052.00 Equity Value of Firm 41,710.67 72,165.81 Shares Outstanding 1,079.19 1,079.19    

Value per Share 38.65 66.87

Football Chart

Management AssessmentThe management has been consistent in its dividend

policy: till date company has returned approximately $11.5 billion.

Management reviews and analyzes business results in constant currencies however we believe the company has been conservative in hedging the currency risk.

Management continues to focus on the mix of franchised and company-owned operations to boost the competitive margin.

McCafe had met sales expectations and has benefited from the high level of advertising that McDonald's has committed to it. Coffee sales now make up 5% of McDonald's total sales.

RecommendationHoldings in McDonald’s are currently 200

shares bought at $52.44Closing price on November 30, 2009 was

$63.25Using a triangulation of the methodologies,

the calculated intrinsic value is $61.05Qualitative factors:

MCD is a very attractive company The stock is at an all time highMCD might outperform the market and its

peers during a market correction. HOLDHOLD