Answer:
Explanation:
current earnings available to equity shareholders :
EPS = current earnings available to equity shareholders / Shares outstanding
0.78 = current earnings available to equity shareholders / 6.3 billion
current earnings available to equity shareholder = 0.74*6.3 billion
= 4.662 billion
a) Calculation of EPS(develops the product in house)
Revised earnings available to equity shareholder = 4.662 billion - (.457 million*0.65) = 4.662 billion-0.297 billion
= 4.365 billion
Revised EPS = 4.365 billion / 6.3 billion
= 0.69
b) Calculation of EPS (does not develops the product in house)
current earnings available to equity shareholder = 4.662 billion
New shares issued = 0.889 billion/17.03
= 0.05202 billion
New shares Outstanding = 6.3 billion+ .05202 billion
= 6.3520 billion
Revised EPS = 4.662 billion / 6.3520 billion
= .73
c) Impact on EPS
Developing the product in house is cheaper,but it will affect the share price greatly since it has great impact on EPS.