Rs is the required return on common stock from an investors view or the cost of common stock from the companys view. Rs can be calculated three ways.

Method 1: Rule of Thumb

Assume the current Rule of Thumb is a 4% difference between stock and debt required returns.

Use the Rd calculated above for McDonalds bond to calculate the Rule of Thumb Rs.

Rule of Thumb Rs =_____________________

Method 2: Constant growth model.

Go to Standard & Poors Database and access the Stock Report. Include the Report in your submission. From this Report, collect the following data:

What is the companys annual dividend?(It is at the top of the first page of the Stock report.) ______________

issuer name : mc donold

sub-product type : 7.375

maturity : 07/15/2033

last sale : price :104.635 and yield :6.831