The October 12, 2006, edition of The Wall Street Journal carried an article entitled “Expedia Might Trip Debt Covenant.” The article revealed that the share price of Expedia Inc., an online travel company, had recently declined by 33 percent following the company’s spin-off from its parent company IAC/InterActive Corporation. [AC/InterActive had acquired Expedia several years earlier in an acquisition that involved \($5.9\) billion in goodwill.

When Expedia was spun off by its parent, the \($5.9\) billion in goodwill associated with the acquisition was downloaded from the consolidated balance sheet to Expedia’s balance sheet. Further, a provision in Expedia’s \($1\) billion borrowing arrangement required that the company maintain a shareholders’ equity of \($5.4\) billion.

With the decline in its share price to \($16\) per share, the company’s market capitalization had dropped to just \($5.2\) billion. The company’s book value at the time was just \($5.8\) billion. Discuss what action the company should take with respect to its \($5.9\) billion in acquisition goodwill. What are the consequences of those actions?