It is simply good business practice to periodically determine the financial worth or cash value of your company. This exercise gives you practice determining the total worth of a company using several methods. Use year-end 2008 data as given in the Cohesion Case on pages 31–32.

Instructions

Step 1 Calculate the financial worth of McDonald’s based on four methods: 

(1) The net worth or stockholders’ equity, 

(2) The future value of McDonald’s earnings, 

(3) The price-earnings ratio,

(4) The outstanding shares method.

Step 2 In a dollar amount, how much is McDonald’s worth?

Step 3 Compare your analyses and conclusions with those of other students.

Data from pages 31–32

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EXHIBIT 5 McDonald's Consolidated Statement of Income In millions, except per share data Years ended December 31 REVENUES Sales by Company-operated restaurants Revenues from franchised restaurants Total revenues OPERATING COSTS AND EXPENSES Company-operated restaurant expenses Food & paper Payroll & employee benefits Occupancy & other operating expenses Franchised restaurants-occupancy expenses Selling, general & administrative expenses Impairment and other charges, net Other operating (income) expense, net Total operating costs and expenses Operating income Interest expense-net of capitalized interest of $12.3, $6.9 and $5.4 Nonoperating (income) expense, net Gain on sale of investment Income from continuing operations before provision for income taxes Provision for income taxes Income from continuing operations Income from discontinued operations (net of taxes of $34.5 and $101.9) Net income Per common share-basic: Continuing operations Discontinued operations Net income 2008 $16,560.9 6,961.5 23,522.4 5,586.1 4,300.1 3,766.7 1,230.3 2,355.5 6.0 (165.2) 17,079.5 6,442.9 522.6 (77.6) (160.1) 6,158.0 1,844.8 4,313.2 $4,313.2 $ 3.83 $ 3.83 2007 $16,611.0 6,175.6 22,786.6 5,487.4 4,331.6 3,922.7 1,139.7 2,367.0 1,670.3 18,907.6 3,879.0 410.1 (103.2) (11.1) 3,572.1 1,237.1 2,335.0 60.1 $2,395.1 $ $ 2006 $15,402.4 5,492.8 20,895.2 5,111.8 3,991.1 3,802.2 1,058.1 2,295.7 134.2 69.1 16,462.2 4,433.0 401.9 (123.3) 4,154.4 1,288.3 2,866.1 678.1 $3,544.2 1.96 $ 0.05 2.02 $ 2.32 0.55 2.87