Sienna Company developed a specialized banking application software program that it licenses to various financial...
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Sienna Company developed a specialized banking application software program that it licenses to various financial institutions through multipleyear agreements. On January these licensing agreements have a fair value of $ and represent Sienna's sole asset. Although Sienna currently has no liabilities, the company has a $ net operating loss NOL carryforward because of recent operating losses.
On January Paoli, Inc., acquired all of Sienna's voting stock for $ Paoli expects to extract operating synergies by integrating Sienna's software into its own products. Paoli also hopes that Sienna will be able to receive a future tax reduction from its NOL. Assume an applicable federal income tax rate of percent.
If there is a greater than percent chance that the subsidiary will be able to utilize the NOL carryforward, how much goodwill should Paoli recognize from the acquisition?
If there is a less than percent chance that the subsidiary will be able to utilize the NOL carryforward, how much goodwill should Paoli recognize from the acquisition?
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