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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Consider the value of Kodak in 1970. At that time, the investment capital per share (ICPS) for Kodak was $20. Given their market power, their return on investment was 15%. During that time, the required rate of return on Kodak was .14. In 1970, the policy of Kodak was to plowback 25 percent of its earnings per share.
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Now consider what has happened to Kodak around the arrival of the new millennium. The biggest development has been digital photography, which does not require the types of chemical processes that was the core of Kodak's business. In fact, Kodak had not been involved with digital photography at all. With the initial discovery and penetration of digital technology, the value of Kodak's stock plummeted. Explain why this happens in terms of the discounted cash flows, payout policy and the present value of growth opportunities.
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