Firms total investment 400000 net profit of last 4 years 65000 50000 80000 70000 the return on net capital employed 12% find value of goodwill if it is based on 4 years purchase of average super profit
Answers
Explanation:
average profit =super profit+average profit
normal profit=capital enmployed x normalrate of return/100
400000x12/100=48000
average profit=65000+50000+80000+70000/4=66500
super average profit=average profit-normal profit
super profit=66500-48000=18500 ans
Goodwill = 73,000
Explanation:
Given:
Investment amount = 4,00,000
Net profit for four year = 65,000 , 50,000 , 80,000 , 70,000
Return on Capital = 12%
Calculation of average profit :
Average profit = (65,000 + 50,000 + 80,000 + 70,000) / 4
Average profit = 66,250
Calculation of normal profit:
Normal profit = 4,00,000 x 12%
Normal profit = 48,000
Calculation of super profit:
Super profit = Average profit - Normal profit
Super profit = 66,250 - 48,000
Super profit = 18,250
Goodwill = 4 year of purchase x Super profit
Goodwill = 4 x 18,250
Goodwill = 73,000
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