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
Answer (1)
27th Jan, 2024
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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