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Polaroid

In 1990, Boeing dominated the commercial-jet aircraft industry. In an effort to maintain its 54 percent market share and competitive position, the company had to decide whether or not to continue development on its newest airframe, the 777. Initial product demand seemed strong but escalating tensions in the Middle East made the demand for future air travel uncertain. Moreover, Boeings competitors had already begun development on similar airframes that would reach the market before the 777. In light of the companys recent poor stock performance and its mission to raise its return on equity, the question of the new aircrafts profitability became paramount.PROTAGONISTSIn March 1996, Ralph Norwood, treasurer of Polaroid Corporation, was asked to consider refinancing proposals from investment bankers of $150 million of debt due to mature in January 1997. Gary DiCamillo, newly appointed CEO of the firm,in reaction to the company's lagging share price, had set forth a new plan to agressively expoit the existing Polaroid brand, introduce product extensions, and enter new emerging markets. Before Norwood can choose a refinancing proposal, he must consider the funding needs of DiCamillo's new corporate strategy and the capital structure which would provide the lowest cost of capital and most financial flexibility. Norwood also needed to consider the maturity structure of debt.COMPANY PROFILENature of productPolaroid Corporation has been engaged primarily in the business of designing, manufacturing, and selling instant photographic imaging products worldwide. Since 1948, this mission has led them to develop instant black-and-white film in 1954, instant color film in 1960, and the SX-70 camera in 1972 which no longer required 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 encourage film sales. By increasing the base...

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