Assgnmtone.docx

    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

    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

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

    [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.

    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 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:

    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.

    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

    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

    Table 1. Immediate Results from the Bayer Announcement in 2015

    ValuPro Net Online Valuation of MONSANTO CORPORATION – 2015

    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%

    Table 2. ValuePro Net Online Valuation

    Monsanto Co. 2015 (Bloomberg Market Rates)

    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

    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

    Table 3. Monsanto Co. Rates

    Income Statement – Monsanto Corp.

    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

    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

    Table 4. Monsanto Income Statement

    Balance Sheet – Monsanto Corp.

    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

    4,654,000

    Goodwill

    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

    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

    Table 5. Monsanto Balance Sheet

    Cash Flow – Monsanto Corp.

    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

    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

    Table 6. Monsanto Statement of Cash Flows

    Rubric

    BUS 505 M4 Milestone1

    BUS 505 M4 Milestone1

    Criteria

    Ratings

    Pts

    30 pts

    30 pts

    30 pts

    10 pts

    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 appropriately and in detail.

    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 misconceptions.

    0 pts

    Level 1 Descriptor Analysis of the acceptability of the proposal is not included or described.

    This criterion is linked to a Learning Outcome

    Evidence

    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 time and trend analysis.

    18 pts

    Level 2 Descriptor The analysis is vaguely supported, with inaccurate justifications not necessarily relevant to the targeted conceptual underpinnings of ratio analysis and time and trend analysis.

    0 pts

    Level 1 Descriptor Evidence related to ratio analysis and time and trend analysis was not provided.

    This criterion is linked to a Learning Outcome

    Evaluation of Limitations

    30 pts

    Level 4 Descriptor Evaluation of the limitations that exist from this type of analysis is appropriate and detailed.

    24 pts

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

    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 misconceptions.

    0 pts

    Level 1 Descriptor Evaluation of the limitations that exist from this type of analysis is not identified or described.

    This criterion is linked to a Learning Outcome

    Control 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 connects with the audience. There are no problems with spelling, punctuation, and grammar.

    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 grammar that should have been fixed. Formatting is not completely correct.

    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 to interfere with the meaning. Formatting is incorrect.

    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 that make it difficult to read. Formatting instructions are not followed.

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