What is the present value of kodaks growth opportunities

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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.

Given Kodak's plowback policy, the market believed that Kodak could continue to generate 15 percent return on investment and would maintain its payout policy. Given these beliefs, what was a fair price for Kodak in 1970 immediately after it paid its 1970 dividend?

Given the assumptions listed above, what is the present value of Kodak's growth opportunities? 

Reference no: EM13943961

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