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Please download the spreadsheet labeled, “McDonalds (MCD) valuation spreadsheet” from the class website. The spreadsheet includes three worksheets: 1) 17 years of income statement, balance sheet history for MCD (plus more limited history of cash flow statements), 2) MCD forecasted financial statements and valuation of MCD’s equity using forecasted free cash flows to equity (FCFE), and 3) a sheet outlining various financial ratios for both historic data as well as throughout the forecast horizon. : you are a junior equity research analyst for the investment bank, Barton, Ingles, Glass, and Company (BIG Co) in May 2015. The analyst covering the restaurant chain industry has abruptly resigned from the company. Unfortunately, a large institutional client wants information about McDonald’s stock and has scheduled a meeting with one of BIG’s managing directors. In a review of the analyst’s files, the managing director found a valuation spreadsheet for MCD dated March 2015, but could not find an accompanying report. You’ve been sent the MCD spreadsheet, and the . Using the information contained in the spreadsheet, NOTE: you may incorporate appropriate stock price information for MCD, any additional financial ratios or other metrics that you can compute from the given data that you deem appropriate, and any additional background information about McDonalds that you deem necessary to write a good report. Please make note of the dates above. The report should avoid incorporating information that would not be known after May 2015. : Provide an effective of the MCD valuation. Your summary should provide the “main point” of the valuation and any major points that you believe need to be stated in a brief reading. REMEMBER: an executive summary is a stand-alone document that provides an overview of your main report. Ideally, the executive summary’s length is approximately 10% of the length of the main report. : Provide an effective . In particular, make sure you discuss what is being valued (forecasted FCFE) and how the FCFE forecast provided translates into the estimated value. In particular, make sure the reader knows how value is being estimated. : Provide an effective from

the forecasted financial statements. These results should clearly relate to McDonald’s forecasted , requirements, and choices. In context, you should also consider historical information as appropriate. : Provide a made within the forecasts and valuation. (NOTE WELL: These assumptions may be explicitly shown in the text of the spreadsheet, or built into the spreadsheet). This list can be constructed as bullet points, but needs to be clearly presented. : Provide your of the made in the analyst’s forecast. Additionally, please cite any aspects of the valuation or forecast that reflect the prior analyst’s mistakes. How would you fix these mistakes? Please use the evidence from the spreadsheet as your primary data source for making critiques of the assumptions. In particular, DO NOT offer opinions without providing clear evidence. : Provide your about the valuation and appropriateness of the valuation in the context of making a “buy/sell” recommendation. You must submit the following: 1) the text of your report, followed by 2) tables and/or graphs of “highlighted” results and/or assumptions (NOTE: elements of each table and/or graph must be discussed in the text of your report and should be labeled “Table 1”, “Figure 1”, etc., and these should be discussed in appropriate order). Your boss has placed two constraints on the pieces to your report. First, the text portion of your report should not exceed 6 pages in length (with double-spaced, 12-point font and 1.25-inch margins on all sides). Second, you should not include more than six (6) tables and/or graphs. The penalties for exceeding the limits will be: 1% deduction for each excess line of text and 10% deduction for each excess table or figure. You will be assessed on your ability to effectively present and discuss the prior analyst’s valuation of McDonald’s stock as outlined in the required format outlined above. Do a good job, and you might be on the short list for a promotion in the next year. Do a lousy job, and be prepared to be part of the yearly purge of the weaker-performing junior analysts! As is always the case, you are being evaluated 1) against your peers, and 2) against those who have preceded you.