Question : Calculate the value of goodwill at 3 years' purchase when: Capital employed Rs.2,50,000; Average profit Rs.30,000 and normal rate of return is 10%.
Option 1: Rs.33,000
Option 2: Rs.25,000
Option 3: Rs.30,000
Option 4: Rs.15,000

Question

Question : Calculate the value of goodwill at 3 years' purchase when: Capital employed Rs.2,50,000; Average profit Rs.30,000 and normal rate of return is 10%.

Option 1: Rs.33,000

Option 2: Rs.25,000

Option 3: Rs.30,000

Option 4: Rs.15,000

Team Careers360 · Accepted Answer

Correct Answer: Rs.15,000

Solution :

Normal Profit = Capital employed X Normal rate of return = Rs.2,50,000 X 10% = Rs.25,000.
Super Profit = Average Profit - Normal Profit = Rs.30,000 - Rs.25,000 = Rs.5,000
Goodwill = Super Profit X Number of years purchase = Rs.5,000 X 3 = Rs.15,000.
Hence, the correct option is 4.

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Question : Calculate the value of goodwill at 3 years' purchase when: Capital employed Rs.2,50,000; Average profit Rs.30,000 and normal rate of return is 10%.Option 1: Rs.33,000Option 2: Rs.25,000Option 3: Rs.30,000Option 4: Rs.15,000

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Question : Calculate the value of goodwill at 3 years' purchase when: Capital employed Rs.2,50,000; Average profit Rs.30,000 and normal rate of return is 10%.
Option 1: Rs.33,000
Option 2: Rs.25,000
Option 3: Rs.30,000
Option 4: Rs.15,000