LOP Bhd has 6.50 billion shares outstanding and a share price of RM19.00. LOP Berhad is considering developing a new networking product in-house at a cost of RM600 million. Alternatively, LOP Berhad can acquire a firm that already has the technology for RM900 million worth (at the current price) of LOP Berhad stock. Suppose that absent the expense of the new technology, LOP will have EPS of RM0.80.

Task assigned:

d. Can a firm with positive net income run out of cash? Critically evaluate. (25 marks)