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Quisco Systems has 6.82 billion shares outstanding and a share price of $18.21. Quisco is considering developing a new networking product in-house at a cost of $493 million. Alternatively, Quisco can acquire a firm that already has the technology for $896 million worth (at the current price) of Quisco stock. Suppose that absent the expense of the new technology, Quisco will have EPS of $0.82. a. Suppose Quisco develops the product in-house. What impact would the development cost have on Quisco's EPS? Assume all costs are incurred this year and are treated as an R&D expense, Quisco's tax rate is 30%, and the number of shares outstanding is unchanged. b. Suppose Quisco does not develop the product in-house but instead acquires the technology. What effect would the acquisition have on Quisco's EPS this year? (Note that acquisition expenses do not appear directly on the income statement. Assume the firm was acquired at the start of the year and has no revenues or expenses of its own, so that the only effect on EPS is due to the change in the number of shares outstanding.) c. Which method of acquiring the technology has a smaller impact on earnings? Is this method cheaper? Explain 30%, and the number of shares outstanding is unchanged. Select from the drop-down menus ) lf Quis o develops the product in house, its earnings would product would not change this year's revenues.) by million with no change to the number of shares outstanding. ts EPS Nul V byto(Assume the nevw b. Suppose Quisco does not develop the product in-house but instead acquires the technology. What effect would the acquisition have on Quisco's EPS this year? (Note that acquisition expenses do not appear directly on the income statement. Assume the firm was acquired at the start of the year and has no revenues or expenses of its own, so that the only effect on EPS is due to the change in the number of shares outstanding.) (Select from the drop-down menus.) lf Quisco acquires the technology or S896 million worth of its stock it will issue million new shares. Since earnings it out this transaction are T billion. s EPS with the purchase is c. Which method o a quinng the technology has a smaller impact on earnings? Is this method cheaper Explain Select a the choices that app . A. Acquiring the technology would have a smaller impact on eanings, but this method is not cheape B Developing itin-house is less costly and provides an immediate tax benefit. The earnings impact is not a good measure of the expense. C. Because the acquisition permanently increases the number of shares outstanding, it will reduce Quisco's earings per share in future years as well