From the course: Financial Accounting Part 2

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McDonald's: The numbers

McDonald's: The numbers

From the course: Financial Accounting Part 2

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McDonald's: The 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. We've got earnings per share and dividends per share data for 2011, 2010, 2009, and 2008. 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're assuming a 15% interest rate. In any valuation exercise, determining the correct interest rate given the risk factors associated with the 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 rates and their use in valuation. This is a true story, but I can't tell you any of the exact details for confidentiality reasons. I was once in a situation where I was allowed to watch two large…

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