Quisco Systems has 6.5 billion shares outstanding and a share price of $18.00 Ousco is considering developing a new networking product in house at a cost of 500 milion. Alematively. Quisco can acquire a firm that already has the technology for 5000 million worth (at the current price of Outcostock Suppose that one the expense of the new technology Cuisce will have EPS of $0.80. a. Suspose Quisco develops the product in house. What impact would the development cost have on Disco's EPS? Assume all costs are incurred this year and are treated as an R&D expense, Ouisco's 35%, and the number of shares outstanding is unchanged b. Suppose Disco does not develop the product in house but instead acquires the technology. What effect would the acquisition have on sco's EPs this year? Note that action expenses do not appear direct 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 mothod of acquiring the technology has a smaller impact on enings? Is this method chor? Explan a. Suppose Cuisco develops the product in house. What impact would the development cont have on Quoc's EPS? Araume al com related this year and are treated as an R&D experien, Chods tax rate is 35%, and the number of shares outstanding is unchanged Quince's now EPs would be $C). Round to the nearest cont) b. Supone uit does not develop the product in house but instead acquires the technok What effect would the acquistion have on Oops EPs this year? Note that otion expenses do not accer 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 Qusco's EPS with the purchase is 8. Round to the nearest cent.) c. Which method of acquiring the technology is cheaper for Ousco? (Select from the drop-down menu o Quisco Systems has 65 bilion shares outstanding and a share price of $18.00. Quisco is considering developing a new networking product in house at a cost of $500 milion Alternatively, Occan acquire a form that already has the technology for $900 million worth the current price of Guisco stock. Suppose that on the expense of the new technology, Quisoo will have EPS of S080 a. Suppose Ouisco develops the product in house What impact would the development cost have on Ocos EPS? Assume al costs we curred this year and are treated as an R&D expense. Ouisco's tax rate is 35%, 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 affect 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 camings? Is this method cheaper? Explan 35%, and the number of shares outstanding is unchanged. Quisco's new EPS would be $. (Round to the nearest cont.) b. Suppose Quisco does not develop the product in house but instead acquires the technology. What the would the store on Quoco EPS is year? (Note that acquisition expenses do not poow directly on the income statomont Assume the firm was acquired at the start of the year and has no revenues or expenses of its dyn so that te only effect on EPS is due to the charge in the number of shares otstanding) Quisco's EPs with the purchase is $. Round to the nearest cont.) c. Which method of acquiring the technology is cheaper for Ouisco? (Select from the drop-down menu) is cheaper for Oisco 7
