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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.