Question

gupta and bose had a firm in which they invested 50000 on an avrragethe profits were 16000 the normal rate of return in the industry is 15% . goodwill is to be valued at four years purchase of profits in excess of profitss @15% on the money invested. calculate the value of goodwil
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Answer 1

Answer:

Capital employed = ₹50,000

Normal rate of return = 15%

So, Normal profit = ₹7,500

Average Profit = ₹16,000

So, Super Profit = ₹16,000 - ₹7,500

= ₹8,500

Hence, Value of goodwill = ₹8,500 × 4

= ₹34,000