Question

Average profits of a firm during the last few years are 80000 and normal rate in a similar business is 10%. if the goodwill of the firm is 100000 at 4 years purchase of super profit find the capital employed by the firm .

Answer 1

Answer:

so this the answer for this question

Answer 2

Goodwill at 4 years purchase of super profit = $\sf{1,00,000}$

Super profit = $\sf{\frac{1,00,000}{4}=25,000}$

Average profit - Normal profit = Super profit

Normal profit = Average profit - Super profit

$\implies$$\sf{80,000-25000=55,000}$

Capital employed = $\sf{\frac{100}{NRR}×Normal \: profit}$

$\implies$$\sf{55,000 × \frac{100}{10}}$

$\implies$$\sf{5,50,000}$