Kodak used to primarily produce and distribute photographic paper and developing
ID: 2645648 • Letter: K
Question
Kodak used to primarily produce and distribute photographic paper and developing materials for traditional (i.e., non digital) photographic methods. A sizable portion of their business was home photography. Since they were one of the few suppliers of such materials, as the population grew, so did the demand for their product. 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.
If Kodak increased its plowback ratio in 1970, what would have happened to their stock price? Circle one.
go up go down no change cannot tell without
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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
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