The risk free interest rate is based on the us

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payout. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with a term equal to the expected life. Weighted-average assumptions 2007 2006 2005 Expected dividend yield 2.26% 1.99% 1.72% Expected stock price volatility 24.7% 26.4% 27.8% Risk-free interest rate 4.76% 4.55% 3.97% Expected life of options IN YEARS 6.26 6.22 7.00 Fair value per option granted $11.59 $9.72 $10.06 Property and equipment Property and equipment are stated at cost, with depreciation and amortization provided using the straight-line method over the following estimated useful lives: buildings–up to 40 years; leasehold improvements–the lesser of useful lives of assets or lease terms which generally include option periods; and equipment–three to 12 years. Goodwill Goodwill represents the excess of cost over the net tangible assets and identifiable intangible assets of acquired restaurant businesses. The Company’s goodwill primarily results from purchases of McDonald’s restaurants from franchisees and ownership increases in international subsidiaries or affiliates, and it is generally assigned to the reporting unit expected to benefit from the synergies of the combination. If a Company- operated restaurant is sold within 24 months of acquisition, the goodwill associated with the acquisition is written off in its entirety. If a restaurant is sold beyond 24 months from the acquisition, the amount of goodwill written off is based on the relative fair value of the business sold compared to the portion of the reporting unit (defined as each individual country). In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Intangible Assets , the annual goodwill impairment test, conducted in the fourth quarter, compares the fair value of a reporting unit, generally based on discounted future cash flows, with its carrying amount including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is measured as the difference between the implied fair value of the reporting unit’s goodwill and the carrying amount of goodwill. The following table presents the 2007 activity in goodwill by segment: Other Countries IN MILLIONS U.S. Europe APMEA (1) & Corporate (2) Consolidated Balance at December 31, 2006 $ 1,012.8 $ 652.4 $ 277.9 $ 130.5 $ 2,073.6 Net restaurant purchases (sales) 133.7 (5.5) 1.2 (4.7) 124.7 Ownership increases in subsidiaries/affiliates 6.1 6.1 Currency translation 53.3 20.9 22.7 96.9 Balance at December 31, 2007 $1,146.5 $700.2 $306.1 $148.5 $2,301.3 (1) APMEA represents Asia/Pacifi c, Middle East and Africa. (2) Other Countries & Corporate represents Canada, Latin America and Corporate. 49
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