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I need help calculating the WACC for Monsanto as stated below. See background info and tables attached. In this project, you will assume that Bayer

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I need help calculating the WACC for Monsanto as stated below. See background info and tables attached.

In this project, you will assume that Bayer is considering a bid for United States seed company Monsanto (Snider, 2016). For purposes of this project, assume that you are Chief Financial Officer of Monsanto Corporation. Bayer's proposal would pair Monsanto, the world's largest seed company, with drug maker Bayer's growing seed and crop protection portfolio. Upon announcement of the possibility of such a bid, shares of St. Louis-based Monsanto (MON) rose by 8.7% (Kirchfield, et. al., 2016). Across 2015, immediately following announcement of a possible merger between the two firms, Bayer's growing agribusiness division saw sales rise 9% to $11.8 billion, while its healthcare sales rose 19% to $26 billion. Overall, Bayer's 2015 sales rose 12%, to $52.8 billion (Business Wire, 2014). On the other hand, Monsanto, which makes seeds (corn, cotton, fruits and other vegetables) and crop protection chemicals such as RoundUp, reported sales of $15 billion in its 2015 fiscal year. This was a 5% decline from the previous year (Daily Management Review, 2016). Assume that Monsanto is taxed (TC) at a rate of 35% and its cost of debt (RD) is 12%. See Table 1, below, for an alternative view of this data. In the context of Bayer's proposal, assume that Bayer's Beta is 1.24. For purposes of valuation of cash flows in the context of Bayer's proposal, consider Monsanto's discounted cash flow for only the upcoming 1 year of sales, and assume that Monsanto is expected to grow at a rate of 3% in the current year. Assume also that Monsanto's current sales are projected to be $15,239,000, while its equity holdings are estimated to be $9,141,333 and its debt is $12,359,333. Assume that Monsanto's Profit Margins and Total Asset Turnover are unchanged from 2015 levels. 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 this year, while capital investment will remain stable

Upon receipt of Bayer's proposal, your company's Board of Directors has directed you, as Chief Financial Officer of Monsanto Corporation, to review key statistics and other information and report to the Board on the following:

Taking account of background information and other information supplied here, determine whether to accept or reject this proposal for $62B. For purposes of this analysis, consider discounted adjusted cash flow for only the current year, in which the firm is anticipated to grow at a rate of 3%. Evaluate the following: From given information (Table 7 will aid you in making these calculations, and has been provided for this purpose):

  1. Ascertain Monsanto's weighted average cost of capital (WACC) and use this along with the firm's growth rate to determine the discounted value of adjusted cash flows. Employ the discounted value of adjusted cash flows to determine how this offer compares to the present value of the firm's adjusted cash flow (CFA*), using the firm's WACC.

See Tables attached.

image text in transcribed Immediate Results from the Bayer Announcement in 2015 Monsanto (MON) Share Price Increased 8.7% Bayer Crop Science Division Sales increased 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 (%) Table 2 ValuePro Net Online Valuation 8% 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 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 - - - 3,523,000 4,075,000 3,570,000 Operating Expenses Operating Income or Loss 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 Discontinued Operations 28,000 13,000 11,000 Extraordinary Items - - - Effect of Accounting - - - Non-recurring Events Changes Other Items - - - 2,314,000 2,740,000 2,482,000 - - - 2,314,000 2,740,000 2,482,000 31-Aug-15 31-Aug-14 31-Aug-13 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 Net Income Preferred Stock and Other Adjustments Net Income Applicable to Common Shares Table 4 Monsanto Income Statement Balance Sheet - Monsanto Corp. Period Ending Assets Current Assets Total Current Assets Total Assets Liabilities 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 21,920,000 21,918,000 20,664,000 Current Liabilities Accounts Payable 4,359,000 3,756,000 Short/Current Long Term 687,000 Debt 315,000 63,000 Other Current Liabilities 438,000 517,000 Total Liabilities 3,950,000 540,000 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 Treasury Stock -4,140,000 12,053,000 10,032,000 Capital Surplus 11,464,000 10,003,000 10,783,000 Other Stockholder Equity -2,801,000 7,188,000 -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 Other Cash Flows from Investing Activities -56,000 Total Cash Flows from Investing Activities 217,000 -1,235,000 -253,000 -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 Change In Cash and Cash Equivalents 1,334,000 -1,301,000 385,000 -93,000 Table 6 Monsanto Statement of Cash Flows Valuation Component Previous 3-Year Average EBIT $ 3,511,347 Depreciation $ 674,000 Taxes* $ 1,228,971 Change in NWC $ 227,911 Capital Spending $ (1,000,000) CFA* $ 3,728,464 Year 1 Firm Value Note that all values are in thousands. This table may be used to present your NPV calculations. Discount factor Discounted CFA* NPV $ 12,359,933 NPV-Debt Debt Table 7 Monsanto Firm Valuation Using Average Expected Sales Based on 3-Year Average of Previous Results

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