Alex Florea Steven Kahan Michael Lavin Eric Xu Yana Zalukina Carol Zhou December 3, 2009

Business Overview World’s #1 fast-food chain by sales Competitors: 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) Yana

Fact Sheet Headquarters: 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 Yana

Types of Restaurants Counter and drive-through services Locations: Stand-alone basis in cities and suburban areas Connected to gas stations/convenience stores Shopping malls Wal-Mart stores Truck stops Features indoor and outdoor playgrounds for children Yana

Business Model 25,975 (80.5%) operated by franchisees and affiliates 6,303 (19.5%) operated by the Company Collects from franchisees: Initial investment fees Royalties (% of sales) Rent (% of sales) Supply food and materials to restaurants through approved 3rd parties Yana

Geographical Revenue Breakdown Yana APMEA: Asia/Pacific, Middle East and Africa Other Countries and Corporate: includes operations in Canada and Latin America, as well as Corporate activities

Macroeconomic Outlook McDonald'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. Michael

Industry Overview Industry 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 competition Low level of concentration Carol

Major Players Carol

SWOT Analysis Carol

5-Year Historical Performance Eric http://www.google.com/finance?q=mcd; Nov 24, 2009

Recent News Sep. 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) Eric

Ratio Analysis Michael McDonald's Corp. Compared with Industry 2004   Compared with Industry 2004 2005 2006 2007 2008 Comp. Sales Growth 6.90% 3.90% 5.70% 6.80% 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% Current ROE 32.90% Average Current Dividend Yield 3.50% Michael 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% Growth of SG&A 6% Income tax rate 30% Eric

WACC Calculation CAPM ROE beta 0.61 21.42% risk-free 3.50% equity premium 5.50% 6.83% cost of debt 4.11% Goal Post (40%,60%) 12.41% Steven

Discounted Cash Flow 2009E 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 68,180.14 Discount Rate 12.41% PV of FCF's 3,176.45 3,118.89 3,141.13 3,162.19 37,982.31 Sum of FCFs 53,762.67 DCF Valuation   Exit Multiple PV of Firm 84,217.81 Less Net Debt 12,052.00 Equity Value of Firm 41,710.67 72,165.81 Shares Outstanding 1,079.19 Value per Share 38.65 66.87 Alex

Football Chart Alex

Management Assessment The 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. Steven

Recommendation Holdings in McDonald’s are currently 200 shares bought at $52.44 Closing price on November 30, 2009 was $63.25 Using a triangulation of the methodologies, the calculated intrinsic value is $61.05 Qualitative factors: MCD is a very attractive company The stock is at an all time high MCD might outperform the market and its peers during a market correction. HOLD Steven