Polaroid Essay examples -- GCSE Business Marketing Coursework

PolaroidIn March 1996, Ralph Norwood, treasurer of Polaroid Corporation, was asked to dig re funding proposals from investment bankers of $150 million of debt due to mature in January 1997. Gary DiCamillo, impudently appointed CEO of the firm,in reaction to the lodges lagging share price, had set forth a new plan to agressively expoit the existing Polaroid brand, introduce product extensions, and enclose new uphill markets. Before Norwood can choose a refinancing proposal, he must consider the funding needs of DiCamillos new corporate outline and the capital structure which would provide the lowest cost of capital and nearly financial flexibility. Norwood similarly needed to consider the maturity structure of debt. companionship PROFILENature of productPolaroid Corporation has been engaged primarily in the business of designing, manufacturing, and selling flash photographic imaging products worldwide. Since 1948, this mission has lead them to develop instant black-and-white painting in 1954, instant assumption film in 1960, and the SX-70 camera in 1972 which no longer needful users to coat the developing picture. However, most revenues generated from the instant photography market were not through camera sales. Cameras were often sold on low margins to push film sales. By increasing the base of instant camera users the company increased file sales, its primary margin product. However, the advent of digital photography in the 1990s threatened to erode Polaroids base of instant film camera users.Demand for Instant Photographic ServicesIn the consumer market, pray for film on newly purchased cameras tended to be highest and then tappered off to sensibly predictable patterns. Therefore film demand often correlated to camera sales. In the commercial market, demand was derived from instant photography for indentification purposes such as I.D. badges, as well as various applications in medicine and impartiality enforcement.The market for instant fil m photography in the U.S. had matured. Sales in 1994 and 1995 had fallen 2 percent and 12 percent respectively. International sales, on the other hand, offered strong growth potential. With rising standards of living and no basis to process 35 mm film in many emerging market countries, there was a large untapped market for instant photography. Polaroids cameras were in high demand. Growth in int... ... all over, the companys EBIT coverage ratio would swag downward.If Norwood, were to thin out the companys debt requirement to under $690.47, Polaroid would maintain its investment-grade bond evaluation and welfare not only from a lower cost of debt, nevertheless also from a lower cost of total captial as shown in adjunct B. In addition, Polaroids EBIT would remain above 2 over the next 5 years.Norwood could also revive the bond rating to A if he were to reduce the required debt amount to $574.47 million. At this level of debt, the companys EBIT coverage ratio would change up ward even more and remain above 4 over the next 5 years. Yet, lowering the amount of debt used would also raise the companys WACC.RECOMMENDATIONSNorwood should choose to maintain the companys current bond rating of BBB. Allowing Polaroids bond rating to drop to BB could not only cause damage to the firms brand name, but it would also increase the companys total cost of capital. Polaroids current level of debt financing surpasses the benefits of debt. Although it increases the companys credit worthiness as measured by their EBIT coverage ratio, it also raises their WACC do to the increased risk of default.