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. Bayers 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 the 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 (T_C) at a rate of 35% and its cost of debt (R_D) is 12%. See Table 1, below, for an alternative view of this data. In the context of Bayers proposal, assume that Bayers Beta is 1.24. For purposes of valuation of cash flows in the context of Bayers proposal, consider Monsantos 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 Monsantos 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 Monsantos 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.

As an alternative proposal means of increasing shareholder value, as Chief Financial Officer of Monsanto, you have also been asked to evaluate a management proposal to expand Monsantos existing operations to pesticide production, yielding an increase in sales of $3,950,000. In the context of this alternative proposal, assume that there is no excess capacity, and the increase in fixed asset needs would be equal to 70% of this increase in sales, while cost of sales would run 20% of sales, using a percentage of sales approach. Also assume that Monsanto issues dividends at a rate of 1.98% of net sales, and thus the firms retention ratio is 98.2%. Assume that Monsantos current total level of sales is $15,239,000, while the division involved in this project is expected to yield sales of $2,950,000 in the current year. Assume that the proposed project has a risk and weighted average cost of capital similar to that of Monsanto, and a firm beta similar to that of Monsanto.

Upon receipt of Bayers proposal, your companys 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:

Assignment

1. 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 each of the following:

a. From given information (The table will aid you in making these calculations, and has been provided for this purpose):

(i) Ascertain Monsantos weighted average cost of capital (WACC) and use this along with the firms 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 firms adjusted cash flow (CFA*), using the firms WACC.

Valuation component	Previous 3 yr average($)in thousands	Year 1
EBIT	3511347
Depreciation	674000
Taxes	1228971
Change in NWC	227911
Capital Spending	(1000000)
CFA	3728464
Discount Factor
Discounted CFA
Debt	12359933

I need detailed calculation and a short analysis as well