Acquire a target for $1,200 (50% cash / 50% debt). $100 asset write-up at 30% tax. Seller has $400 assets, $250 liabilities. Walk through the buyer's balance sheet and find the goodwill created.

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IBPrep · Accepted Answer

Assets: -$600 cash used + $100 asset write-up + $400 seller assets = -$100 before goodwill. Liabilities: $30 DTL (write-up x tax rate) + $250 seller liabilities + $600 new debt = +$880 (seller equity is wiped).

Acquire a target for $1,200 (50% cash / 50% debt). $100 asset write-up at 30% tax. Seller has $400 assets, $250 liabilities. Walk through the buyer's balance sheet and find the goodwill created.

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Acquire a target for $1,200