Question

Please Solve the following

The restaurant industry has a trailing PE ratio of 24.91, a Price/Sales ratio of 3.77, and a dividend yield of 2.10%. McDonald’s Corp (MCD) has trailing EPS of $6.66, sales per share of $27.50, and annual dividends of $3.90. Based on each of the restaurant industry multiples and the underlying EPS, sales, and dividends for MCD, estimate the value per share of MCD. Then calculate the weighted average value per share (weighting each value equally). (Enter an amount to the nearest $0.01. Leave the $ sign off.)

Answer 1

Answer : 151.76

Calculation :

Value per share of MCD :

Value per share as per restaurant industry PE Ratio :

PE Ratio = Price / EPS

24.91 = Price / 6.66

Price = 165.90

Value per share as per restaurant industry Price/Sales Ratio :

Price/Sales Ratio = Price / Sales

3.77 = Price / 27.50

Price = 103.68

Value per share as per restaurant industry dividend yield Ratio :

dividend yield Ratio = Dividend / Price

2.10% = 3.90 / Price

Price = 185.71

Weighted average value per share = (165.90 + 103.68 + 185.71 ) / 3

= 455.29 / 3

= 151.76