1. Compute sustainable growth rate and internal growth rate. Use DuPont Identity and leverage concept. Describe calculations of sustainable growth rate and internal growth rate. (see attached for sustainable growth rate numbers)

2. Compare to present value of adjusted future cash flows (CFA) . Ascertain Monsanto's weighted average cost of capital (WACC) and use this along with the firm's growth rate (3%) 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 TABLE 7 attached)

3. Determine the extent to which Monsanto will have to take on additional debt, given that it wishes to retain its current dividend ratio and does not wish to sell additional equities. Assume that Monsanto is taxed (TC) at a rate of 35% and its cost of debt (RD) is 12%.

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Valuation Previous 3-Year Year Firm Value Component Average $ 3,511,347 Note that all values are in thousands. This table may be used to present your NPV calculations. EBIT $ 674,000 Depreciation $ 1,228,971 Taxes* $ 227,911 Change in NWCC $ (1.000,000) Capital Spending $ 3,728,464 CFA* Discount factor Discounted CFA* NPV $ 12,359,933 NPV-Debt Debt 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