BUS: Final Project Document Your final project for this course is to prepare a financial analysis. This final project takes a close look at two corporations, Bayer and Monsanto. Bayer is considering a bid for United States seed company Monsanto (Snider, 2016). For purposes of this project, you will act as the Chief Financial Officer of Monsanto Corporation, analyzing financial documents and determining whether Monsanto should indeed go forward with acceptance of the purchase.

The project is divided into three milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. Preliminary milestones will be submitted in Modules Four and Six. The final submission will occur in Module Eight.

Milestones

In this assignment you will demonstrate your mastery of the following course outcomes:

Milestone 1: Evaluation of the Proposal

Before completing this assignment, review the Final Project Document. Background information found in the Final Project Document applies to Milestones One through Three. In the final project, you will assume the role of Chief Financial Officer of Monsanto Corporation. Bayer is considering a bid for United States seed company Monsanto. Assume that relevant tax rate is 35%. EBIT, depreciation, capital spending, and the change in net working capital will grow at the same rate as sales, which is expected to grow at a rate of 3% across the current year, while capital investment will remain stable. Assume that operational results

Milestone 1: Evaluation of the Proposal Due in Module 4

Milestone 2: Evaluation of an Alternative Opportunity Due in Module 6

Milestone 3: Final Project Submission Due in Module 8

[CO1] Analyze financial reports to determine a firm’s performance.

[CO2] Apply the strategic planning processes necessary to manage the long- and short-term financial activities of the firm.

[CO3] Perform valuation of financial instruments.

[CO4] Evaluate the appropriateness of an investment using applicable economic, industry, and competitive analysis.

quoted outside of Tables 4, 5 and 6 (income statement, balance sheet, and statement of cash flows, below), are interim measures to be used for purposes of your calculations.

Based on the proposal’s likely effect on shareholder value, determine whether to accept or reject this proposal for $62B, using evidence provided here in Tables 1 through 6, to support your analyses. Evaluate each of the following:

A. Whether to accept or reject this proposal, using evidence drawn from ratio analysis, and time and trend analysis and other evidence from assigned readings covered in Modules One through Three to support your determinations. Compute and include two ratios per each of the four main areas of ratio analysis, including short-term solvency, asset utilization, long-term solvency, and profitability.

B. Evaluate limitations that may exist in using these varieties of analysis to make this determination.

Compose your work in a .doc or .docx file type using a word processor (such as Microsoft Word, etc.) and save it frequently to your computer. For those assignments that are not written essays and require uploading images or PowerPoint slides, please follow uploading guidelines provided by your instructor.

Check your work and correct any spelling or grammatical errors. When you are ready to submit your work, click “Submit Assignment” in the upper right corner. Click on “Browse,” browse your computer, and select your file. Click “Open” and verify the correct file name has appeared next to the Browse button. Enter your comments, if any, in the Comments area. Click on “Submit Assignment.”

Evaluation

This assignment will be graded using the rubric displayed below. Please review this rubric prior to beginning your work. You can also access the rubric on the Course Rubrics page within the Start Here module. This assignment is worth 10% of your final course grade.

Immediate Results from the Bayer Announcement in 2015

Table 1. Immediate Results from the Bayer Announcement in 2015

ValuPro Net Online Valuation of MONSANTO CORPORATION – 2015

Table 2. ValuePro Net Online Valuation

Monsanto Co. 2015 (Bloomberg Market Rates)

Monsanto (MON) Share Price Increased 8.7%

Bayer Crop Science Division Sales increase 9% to $11.8 billion

Bayer Healthcare Division Sales Increased 19% to $26 billion

Bayer Pharmaceutical Sales Increased 12%, to $52.8 billion

Monsanto Sales Decreased 5% to $15 billion

Return on Assets 8.56 Return on Equity 14.93

Sales ($mil) 14,757 Investment Rate (% of Rev) 4.78

Growth Rate (%) 13.5 Working Capital (% of Rev) 29.19

Net Oper. Profit Margin (%) 21.3 Short-Term Assets ($mil) 11141

Tax Rate (%) 30.584 Short-Term Liab. ($mil) 4055

Stock Price ($) 86.74 Equity Risk Premium (%) 3

Shares Outstanding (mil) 533.8 Company Beta 1.05

10-Yr Treasury Yield (%) 500% Value Debt Out. ($mil) 2.054

Bond Spread Treasury (%) 1.5 Value Pref. Stock Out. ($mil) 0

Preferred Stock Yield (%) 7.5 Company WACC (%) 8%

MON:US

Current Price 106.00 (USD)

Open 106.80

Day Range 109.69-109.54

Volume 18,049,774

Previous Close 106

52 Week Range 81.22-120

Table 3. Monsanto Co. Rates

Income Statement – Monsanto Corp.

1 Year Return -7.06%

YTD Return 10.94%

Current P/E Ratio (TTM) 23.67

Earnings Per Share (USD) (TTM) 4.62

Market Cap (B USD) 47.747

Shares Outstanding 436.845

Price/Sales (TTM) 3.65

Dividend Indicated Gross Yield 1.98%

Sector Materials

Industry Chemicals

Sub-Industry Agricultural Chemicals

Period Ending 31-Aug-15 31-Aug-14 31-Aug-13

Total Sales 15,001,000 15,855,000 14,861,000

Cost of Sales 6,819,000 7,281,000 7,208,000

Gross Profit 8,182,000 8,574,000 7,653,000

Operating Expenses

Research Development 1,580,000 1,725,000 1,533,000

Selling General and Administrative

2,686,000 2,774,000 2,550,000

Non Recurring 393,000 – –

Others – – –

Total Operating Expenses – – –

Operating Income or Loss

3,523,000 4,075,000 3,570,000

Income from Continuing Operations

Total Other Income/Expenses Net

71,000 – 31,000

Earnings Before Interest and Taxes

3,594,000 4,075,000 3,601,000

Interest Expense 433,000 248,000 172,000

Income Before Tax 3,161,000 3,827,000 3,429,000

Table 4. Monsanto Income Statement

Balance Sheet – Monsanto Corp.

Income Tax Expense 864,000 1,078,000 915,000

Minority Interest -11,000 -22,000 -43,000

Net Income from Continuing Ops

2,286,000 2,727,000 2,471,000

Non-recurring Events

Discontinued Operations 28,000 13,000 11,000

Extraordinary Items – – –

Effect of Accounting Changes

– – –

Other Items – – –

Net Income 2,314,000 2,740,000 2,482,000

Preferred Stock and Other Adjustments

– – –

Net Income Applicable to Common Shares 2,314,000 2,740,000 2,482,000

Period Ending 31-Aug-15 31-Aug-14 31-Aug-13

Assets

Current Assets

Cash and Cash Equivalents

3,701,000 2,367,000 3,668,000

Short Term Investments

47,000 40,000 254,000

Net Receivables 3,182,000 3,466,000 3,042,000

Inventory 3,496,000 3,597,000 2,947,000

Other Current Assets

199,000 205,000 166,000

Total Current Assets 10,625,000 9,675,000 10,077,000

Long Term Investments

42,000 92,000 237,000

Property Plant and Equipment

4,973,000 5,082,000 4,654,000Goodwill 4,061,000 4,319,000 3,520,000

Intangible Assets 1,332,000 1,554,000 1,226,000

Accumulated Amortization

– – –

Other Assets 610,000 746,000 496,000

Deferred Long Term Asset Charges

277,000 450,000 454,000

Table 5. Monsanto Balance Sheet

Cash Flow – Monsanto Corp.

Total Assets 21,920,000 21,918,000 20,664,000

Liabilities

Current Liabilities

Accounts Payable 3,950,000 4,359,000 3,756,000

Short/Current Long Term Debt

687,000 315,000 63,000

Other Current Liabilities

540,000 438,000 517,000

Total Liabilities 14,930,000 14,043,000 8,105,000

Stockholders’ Equity

Misc. Stocks Options Warrants

– – –

Redeemable Preferred Stock

– – –

Preferred Stock – – –

Common Stock 6,000 6,000 6,000

Retained Earnings 10,374,000 9,012,000 7,188,000

Treasury Stock -12,053,000 -10,032,000 -4,140,000

Capital Surplus 11,464,000 10,003,000 10,783,000

Other Stockholder Equity

-2,801,000 -1,114,000 -1,278,000

Total Stockholder Equity

6,990,000 7,875,000 12,559,000

Net Tangible Assets 1,597,000 2,002,000 7,813,000

Period Ending 31-Aug-15 31-Aug-14 31-Aug-13

Net Income 2,314,000 2,740,000 2,482,000

Operating Activities, Cash Flows Provided By or Used In

Depreciation 716,000 691,000 615,000

Adjustments to Net Income 240,000 233,000 113,000

Changes in Accounts Receivables 68,000 -172,000 222,000

Changes in Liabilities 457,000 482,000 -129,000

Changes in Inventories -425,000 -650,000 -192,000

Changes in Other Operating Activities -273,000 -292,000 -414,000

Total Cash Flow from Operating Activities 3,108,000 3,054,000 2,740,000

Table 6. Monsanto Statement of Cash Flows

Rubric BUS 505 M4 Milestone1

BUS 505 M4 Milestone1

Investing Activities, Cash Flows Provided By or Used In

Capital Expenditures -967,000 -1,005,000 -741,000

Investments 4,000 235,000 217,000

Other Cash Flows from Investing Activities -56,000 -1,235,000 -253,000

Total Cash Flows from Investing Activities -1,019,000 -2,095,000 -777,000

Financing Activities, Cash Flows Provided by or Used in

Dividends Paid -966,000 -932,000 -976,000

Sale Purchase of Stock -698,000 -6,834,000 -705,000

Net Borrowings 1,238,000 -5,536,000 127,000

Other Cash Flows from Financing Activities -36,000 -48,000 -10,000

Total Cash Flows from Financing Activities -430,000 -2,259,000 -1,485,000

Effect of Exchange Rate Changes -325,000 -1,000 -93,000

Change In Cash and Cash Equivalents 1,334,000 -1,301,000 385,000

Criteria

Ratings Pt30303010

Total Points: 100

30 pts Level 4 Descriptor Analysis of the acceptability of the proposal is included and is relevant to the firm and shareholders, and is described

24 pts Level 3 Descriptor Analysis of the acceptability of the proposal is included and is relevant to the firm and shareholders, and is described appropriately, though minor details are missing. The analysis is clearly laid out, and is relevant and specific to the utilization of additional evidence drawn from ratio analysis and trend analysis, but may be inaccurate and/or missing details.

18 pts Level 2 Descriptor Analysis of the acceptability of the proposal is included, but not described appropriately, with major details missing and evidence of

0 pts Level 1 Descriptor Analysis of the acceptability of the proposal is not include

This criterion is linked to a Learning OutcomeEvidence

30 pts Level 4 Descriptor The analysis is thoroughly laid out, and is relevant and specific to the utilization of additional evidence drawn from ratio analysis, and time and trend analysis. It is supported with clear, thorough, appropriate, and evidence-based explanations and justifications relevant to the conceptual underpinnings of ratio analysis, and time and trend analysis.

24 pts Level 3 Descriptor The analysis is supported with appropriate and evidence-based explanations and justifications relevant to the targeted conceptual underpinnings of ratio analysis and

18 pts Level 2 Descriptor The analysis is vaguely supported, with inaccurate justifications not necessarily relevant to the targeted conceptual underpinnings of

0 pts Level 1 Descriptor Evidence related to ratio analysis and time

This criterion is linked to a Learning OutcomeEvaluation of Limitations

30 pts Level 4 Descriptor Evaluation of the limitations that exist from this type of analysis is

24 pts Level 3 Descriptor Evaluation of the limitations that exist from this type of analysis is appropriate, though minor details are

18 pts Level 2 Descriptor Evaluation of the limitations that exist from this type of analysis is identified, with major details missing and evidence of

0 pts Level 1 Descriptor Evaluation of the limitations that exist from this type of analysis is not identified

This criterion is linked to a Learning OutcomeControl of Syntax, Mechanics, and Format

10 pts Level 4 Descriptor Choice of words and sentences demonstrate expertise in the field, using relevant key terms appropriately to convey messages in a natural way, with details and language that

8 pts Level 3 Descriptor Choice of words and sentences demonstrate proficiency in the field, using relevant key terms appropriately to convey messages with language that connect with the audience. There are minimal problems with spelling, punctuation, and

6 pts Level 2 Descriptor Choice of words and sentences demonstrate students' competence in the field, referring to relevant terms to convey messages, though at times forcibly, or not appropriately. Little to no connection is felt between the writing and audience. There are problems with spelling, punctuation, and grammar, but not enough

0 pts Level 1 Descriptor Although ideas are presented, there is minimal usage of terms relevant and important to the field. There are significant problems with spelling, punctuation, and grammar