Alternatvely, Quisco can acquire a firm that aready has a she tectholo of \$18.92. Quisco is considering developing a new networking product in house at a cost of $505 mition, technology, Quisco will have EPS or $0.75. a. Suppose Quisco develops the product in-house. What impact would the develcpment cost have on Qusco's EPS? Assume at costs are incuared this year and are treated as an R8D expense, Quisco's tax rate is 30%, and the number of shares outstanding is unchanged b. Suppose Quisco does not deveiop the product in-house bit instead acquires the technoiogy. What effect would the acquisition have on Quisco's EPS this year? (Note that acguisition expenses do not appear diectly on the income statement. Assume the firm was acquired at the start of the year ard has no revenues or expenses of its own, so that the only effect on EPS is tue to the change in the number of shares outstanding ) c. Which method of acquiring the technology has a smaller impact on eamings? is this method cheaper? Explain. a. Suppose Quisco develops the product in-house. What impact would the development cost have on Qusco's EPS? Assume all costs are incurred this year and are treated as an RoD expense, Quisco's tax ra'e is 30%, and the number of shares outstanding is unchanged. (Select from the diop-doan menus.) If Quisco develops the product inhouse, its earnings would by milicn. With no change to the number of shares outstanding, its EPS would (Assume the new product would not change this year's revenues.) Quisco Systems has 6.66 billion shares outstanding and a share price of $18.92. Quisco is considering developing a new networking product in-house at a cost of $505 million. Alternatively, Quisco can acquire a firm that already has the technology for $900 million worth (at the current price) of Quisco stock. Suppose that absent the expense of the new technology, Quisco will have EPS of $0.75. 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 acquirina the technology has a smaller impact on earnings? Is this method 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. (Select from the drop-down menus.) If Quisco develops the product in-house, its earnings would by million. With no change to the number of shares outstanding, its EPS would new product would not change this year's revenues.)
