How to calculate industry's capm ,pe ratio ggm,

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Exchange: NYSE Stock: McDonald's Corporation Industry- Restaurants Employees: 4,40,000

• McDonald’s Corporation franchises and operates McDonald’s restaurants in the global restaurant industry.

• These restaurants serve a menu at various price points providing value in 119 countries globally.

• As of December 31, 2011, of the 33,510 restaurants in 119 countries 27,075 were franchised or licensed (including 19,527 franchised to conventional franchisees, 3,929 licensed to developmental licensees and 3,619 licensed to foreign affiliates (affiliates)-primarily Japan) and 6,435 were operated by the Company.

• McDonald’s menu includes hamburgers and cheeseburgers, Big Mac, Quarter Pounder with Cheese, Filet-O-Fish, several chicken sandwiches, Chicken McNuggets, Snack Wraps, French fries, salads, oatmeal, shakes, McFlurry desserts, sundaes, soft serve cones, pies, soft drinks, coffee, McCafe beverages and other beverages.

P/E Ratio and valuation for the current year

• Earnings per share (EPS) Ratio = NET INCOME/WEIGHTED AVERAGE SHARES

5,464.8/1,020.2 =5.357576946

• P/E Ratio- MPS/EPS

101.42/5.36=18.92

• Valuation

101.42*27.2/18.92=145.8046512

PRICE RATIOS COMPANY INDUSTRY S&P 500

Current P/E Ratio 18.9 27.2 43.7

P/E Ratio 5-Year High

NA 10.7 12.4

P/E Ratio 5-Year Low NA 3.1 2.9

Price/Sales Ratio 3.69 2.93 2.49

Price/Book Value 6.65 7.34 6.99

Price/Cash Flow Ratio 14.6 15 15.7

Cash from Operating Activities2012 2011 2010 2009 2008

Net Income/Starting Line 5,464.8 5,503.1 4,946.3 4,551.0 4,313.2

(+)Non cash expenses

Depreciation/Depletion 1,488.5 1,415.0 1,276.2 1,216.2 1,207.8

Amortization 0.0 0.0 0.0 0.0 0.0

Deferred Taxes 134.5 188.4 -75.7 203.0 101.5

Non-Cash Items 1.4 3.6 323.8 -390.2 48.9

(+) Changes in Working Capital

Changes in Working Capital -123.1 40.0 -129.0 171.0 245.8

Cash from Operating Activities 6,966.1 7,150.1 6,341.6 5,751.0 5,917.2

2012 2011 2010 2009 2008

Net cash provided by operating activity 6,966.1 7,150.1 6,341.6 5,751.0 5,917.2

(-) capital expenditure

(-3,049.2) (-2,729.8) (-2,135.5) (-1,952.1) (-2,135.7)

(-) dividend (-2,896.6) (-2,609.7) (-2,408.1) (-2,235.5) (-1,823.4)

Free cash flow 1020.3 1810.6 1798 1563.4 1958.1

CAPITAL ASSETS PRICING MODEL

• Risk free rate =7%• Rm= YTD S&P 500 = 6.38• Beta=0.94 CAPM formula (Expected return = Risk-free rate + Beta (Rm(?) - Risk-free).=0.07+0.94(6.38-0.07)=1.01*6.45=6.5145

Gordon Growth Model• Dividend Yield= 3.02 • Dividend 1Yr=13.44 • 5 Year Dividend Growth=13.86 • ROI=17.78• Stock Value (P) = D / (k – G)• Where:• D= Expected dividend per share one year from now • k= required rate of return for equity investor • G= Growth rate in dividends. =13.44/(17.78-13.86)=13.44/3.92=3.42857

Exchange: NYSE Stock: International Business Machines Corp.

Industry: Diversified Computer Systems Employees: 434,246

• International Business Machines Corporation (IBM) is an information technology (IT) company.

• IBM operates in five segments: Global Technology Services (GTS), Global Business Services (GBS), Software, Systems and Technology and Global Financing.

• GTS provides IT infrastructure services and business process services.• GBS provides professional services and application management

services. • Software consists of middleware and operating systems software. • Systems and Technology provides clients with business solutions

requiring advanced computing power and storage capabilities. • Global Financing invests in financing assets, leverages with debt and

manages the associated risks. • In December 2012, it acquired Kenexa.• In February 2013, it completed the acquisition of StoredIQ.• In March 2013, the Company acquired Star Analytics Inc. • Effective March 19, 2013, the Company acquired Star Analytics Inc.

16,604.0/ 1,155.45=14.37015881

• P/E Ratio- MPS/EPS 209.41/14.37=14.57

• Valuation

209.41*12.6/14.57 =181.0958133

P/E Ratio 5-Year High NA 0.2 24.1

P/E Ratio 5-Year Low NA 0 2.6

Price/Cash Flow Ratio 11 9.5 15.7

Amortization 1,284.0 1,226.0 1,174.0 1,221.0 1,310.0

Deferred Taxes 797.0 1,212.0 1,294.0 1,773.0 1,900.0

Non-Cash Items -41.0 355.0 -172.0 163.0 321.0

Changes in Working Capital -2,451.0 -2,390.0 -1,237.0 418.0 -1,193.0

2012 2011 2010 2009 2008

(-4,717.0) (-4,667.0) (-4,754.0) (-4,077.0) (-4,887.0)

(-) divident (-3,773.0) (-3,473.0) (-3,177.0) (-2,860.0) (-2,585.0)

Free cash flow 11095 11707 11618 13836 11340

• Risk free rate =7%• Rm= YTD S&P 500= 0.37 • Beta=0.70 CAPM formula (Expected return = Risk-free rate + Beta (Rm(?) - Risk-free).=0.07+0.70(0.37-0.07)=0.77*0.3=0.231

Gordon Growth Model• Dividend Yield=1.62 • Dividend 1Yr=13.79 • 5 Year Dividend Growth=17.08 • ROI=22.19 • Stock Value (P) = D / (k – G)• Where:• D= Expected dividend per share one year from now • k= required rate of return for equity investor • G= Growth rate in dividends. =13.79/(22.19-17.8)=13.79/4.39=3.14123

Exchange: NASDAQ Stock: Google Inc Industry: Internet Information ProvidersEmployees: 53,861

• Google Inc. (Google) is a global technology company focused on improving the ways people connect with information.

• The Company generates revenue primarily by delivering online advertising. • As of December 31, 2011, the Company’s business was focused on areas, such

as search, advertising, operating systems and platforms, and enterprise. • Businesses use its AdWords program to promote their products and services

with targeted advertising. • In addition, the third parties that comprise the Google Network use its AdSense

program to deliver relevant advertisements that generate revenue.• In May 2012, Google acquired Motorola Mobility Holdings, Inc. • As of January 2012, over 90 million people had joined Google+.• In April 2011, the Company acquired PushLife.• On July 31, 2012, it acquired marketing start-up Wildfire. • In September 2012, it acquired VirusTotal and Nik Software. • In February 2013, Google Inc acquired Channel Intelligence, Inc. one of the

consolidated companies of ICG Group Inc.

10,737.0/332.31=32.3109229

• P/E Ratio- MPS/EPS 783.05/32.31=24.2355308

• Valuation 783.05*18.8 /24.23=607.5666529

PRICE RATIOS

COMPANY INDUSTRY S&P 500

P/E Ratio 5-Year High

46.6 33.7 24.1

P/E Ratio 5-Year Low

18 12.4 2.6

Price/Sales Ratio

5.14 7.01 2.49

Price/Book Value

3.6 4.79 6.99

Price/Cash Flow Ratio 18.8 39.9 15.7

Amortization 1,988.0 1,396.0 1,067.0 1,240.03 1,212.24

Deferred Taxes -266.0 343.0 9.0 -268.06 -224.65

Non-Cash Items 2,288.0 2,004.0 1,270.0 1,053.52 2,023.53

Changes in Working Capital 898.0 630.0 -99.0 485.99 327.23

2012 2011 2010 2009 2008

-3,273.0 -3,438.0 -4,018.0 -809.89 -2,358.46

(-) dividend 0.0 0.0 0.0 0.0 0.0

Free cash flow 13346 11127 7063 8506.31 5494.4

• Risk free rate =7%• Rm=(YTD)S&P 500=1.55• Beta=0.39 CAPM formula (Expected return =Risk-free rate + Beta (Rm(?) - Risk-free).=0.07+0.39(1.55-0.07)=0.46* 1.48=0.6808

Gordon Growth Model

• Dividend Yield= -- • Dividend 1Yr= -- • 5 Year Dividend Growth= -- • ROI=ROI: 15.08 • Stock Value (P) = D / (k – G)• Where:• D= Expected dividend per share one year from now • k= required rate of return for equity investor • G= Growth rate in dividends.

Zero growth

Exchange: NASDAQ Stock: Microsoft Corporation Industry: Application Software Employees: 94,000

• Microsoft Corporation is engaged in developing, licensing and supporting a range of software products and services.

• The Company also designs and sells hardware, and delivers online advertising to the customers.

• It operates in five segments: Windows & Windows Live Division (Windows Division), Server and Tools, Online Services Division (OSD), Microsoft Business Division (MBD), and Entertainment and Devices Division (EDD).

• The Company' products include operating systems for personal computers (PCs), servers, phones, and other intelligent devices; server applications for distributed computing environments; productivity applications; business solution applications; desktop and server management tools.

• In July 2012, Comcast Corp. acquired the Company's 50% stake in MSNBC.com.

• In October 2012, it acquired PhoneFactor Inc. • On July 18, 2012, it acquired Yammer, Inc. (Yammer).• Effective March 19, 2013, it acquired Netbreeze GmbH.

16,978.0/ 8,506.0 =1.996002822

• P/E Ratio- MPS/EPS 28.70/

1.996002822=14.37873719

• Valuation 28.70* 21.6/14.38 =43.10987483

P/E Ratio 5-Year High 19.1 10.4 24.1

P/E Ratio 5-Year Low 8.2 2.2 2.6

Price/Cash Flow Ratio 12.8 17.1 15.7

Amortization 0.0 0.0 0.0 0.0 0.0

Deferred Taxes 954.0 2.0 -220.0 762.0 935.0

Non-Cash Items 10,901.0 4,079.0 2,199.0 1,322.0 3,375.0

Changes in Working Capital -174.0 -3,003.0 661.0 -178.0 -2,435.0

2012 2011 2010 2009 2008

-2,305.0 -2,355.0 -1,977.0 -3,119.0 -3,182.0

(-) dividend -6,385.0 -5,180.0 -4,578.0 -4,468.0 -4,015.0

Free cash flow 22936 19459 17518 11450 14415

• Risk free rate =7%• Rm= YTD S&P 500= -1.32 • Beta=0.95 CAPM formula (Expected return = Risk-free rate + Beta (Rm(?) - Risk-free).=0.07+0.95((-1.32)-0.07)=1.02*(-1.39)= -1.4178

Gordon Growth Model• Dividend Yield= 3.21%• Dividend 1Yr= % 25.00 • 5 Year Dividend Growth= 14.87%• ROI=16.84 • Stock Value (P) = D / (k – G)• Where:• D= Expected dividend per share one year from now • k= required rate of return for equity investor • G= Growth rate in dividends. =25.00/(16.87-14.87)=25.00/2=12.5

How to calculate industry's capm ,pe ratio ggm,

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