Set 1 – Strategic Planning For McDonald’s

Set 1: Strategic Planning For McDonald’s  

Exercise 8A: Perform an EPS/EBIT Analysis for McDonald’s

Purpose

An EPS/EBIT analysis is one of the most widely used techniques for determining the extent that debt or stock should be used to finance strategies to be implemented. This exercise can give you practice performing EPS/EBIT analysis. For this exercise, it is best to use the strategic planning template. Just open the template and click on the EPS/EBIT icon, enter the appropriate information given below, and analyze the results. You may do this exercise manually, but the template is fast and effective and widely used globally by both businesses and students. (We authors want you to be able to say on your resume that you are “proficient using excel-based strategic planning software,” so potential employers will be impressed).

Instructions

Amount McDonald’s needs: $5,000 million to build 500 new restaurants outside the United States.

Interest rate: 3%

Tax rate: 28%

Stock price: $250

Number of shares outstanding: 750 million

EBIT: Pessimistic: $7,000 million; Realistic: $9,000 million; Optimistic: $10,000 million

Steps

Step 1 Use your Exercise 8B work. Scroll to the bottom of the template and move to the far right along the bar and click on the icon Projected Financial Ratios.

Step 2 See the ratios calculated automatically and the percentage changes provided.

Step 3 Based on the projected ratios you see, what are McDonald’s two major strengths and two major weaknesses going forward? Justify your reasoning.

ASSIGNMENT 8B

Exercise 8B: Prepare Projected Financial Statements for McDonald’s (SUBMIT HERE)

Purpose

This exercise is designed to give you experience preparing projected financial statements. This analysis is a strategic finance and accounting issue because it allows managers to anticipate and evaluate the expected results of various strategy implementation approaches. For this exercise, it is best to use the strategic planning template. Just open the template and click on the Projected Financial Statements icon and work from there. You may want to refer back to Exercise 4A at the end of Chapter 4 where you perhaps (hopefully) entered McDonald’s existing financial statements into the template format. If you did not do that then, do this now following guidelines given both in the template and in Table 8-4 in this chapter. You may do this exercise by hand, but the template is fast and effective and widely used globally by both businesses and students. (Plus on your resume you may then say you are “experienced using excel-based strategic planning software,” so potential employers will be impressed with your skills and abilities).

Instructions

Step 1 Develop a projected income statement and balance sheet for McDonald’s. Assume that McDonald’s needs to raise $1 billion to increase its market share and plans to obtain 50 percent financing from a bank and 50 percent financing from a stock issuance. Make other assumptions as needed, and state them clearly

Assigmemt 8C

Exercise 8C: Determine the Cash Value of McDonald’s (Submit Here)

Purpose

It is simply good business to continually know the cash value (corporate valuation) of your company. This exercise gives you practice in determining the total worth of a company using several methods. To perform this analysis, use McDonald’s financial statements as given in the Cohesion Case.

Instructions

Step 1 Calculate the financial worth of McDonald’s based on four approaches: (1) the net worth method, (2) the net income method, (3) the price-earnings ratio method, and (4) the outstanding shares method.

Step 2: Get an average of the four methods. In a dollar amount, how much is McDonald’s worth?

Assignment 8D

Exercise 8D: Prepare Projected Financial Ratios for McDonald’s (Submit Here)

Purpose

Financial ratios are vastly more than just an exercise for students to perform. If any firm’s financial ratios get out of line with industry averages or decline over time, investors can withdraw support literally overnight. Projected financial ratios are an excellent means for anticipating financial results so as to avoid overnight calamities. The template will generate projected financial ratios after you convert your firm’s financial statements to the template format and then develop projected financial statements based on recommended strategies.

Step 1 Use your Exercise 8B work. Scroll to the bottom of the template and move to the far right along the bar and click on the icon Projected Financial Ratios.

Step 2 See the ratios calculated automatically and the percentage changes provided.

Step 3 Based on the projected ratios you see, what are McDonald’s two major strengths and two major weaknesses going forward? Justify your reasoning.

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