be at -1.3161 discount to the S&P 500.

As a result, the MCD PE was calculated to be at

19.

MCD
SPX (Premium/Discount)
2004 20.962 3.638
2003 28.978 13.68
2002 41.449 24.875
2001 36.892 17.11
2000 29.267 6.084
1999 32.899 0.711
1998 26.703 0.513
1997 22.321 0.812
1996 19.213 -4.165
1995 16.516 -4.4762
1994 19.588 0.731

R-SQ 73%
Correlation 0.85
Regression Line MCD =-21.378 +0.9996SPX
19.039

We believe that this regression is the appropriate one to use since it shows a strong

correlation and in fact it will probably become stronger over the long term given the

stability that we believe the company will experience over the next years due to its

maturity.

We use the 19 PE as our benchmark in estimating the expected PE for 2005.

Nevertheless, we want to adjust this P/E in order to be conservative and take into account

the company’s maturity compared to the industry which now trades at an average of 21.5.

As a result we believe that the company’s PE for the next fiscal year will be 18 and this

PE will gradually decrease over the years as follows.

38