The capital employed is Rs150000the average profit of last 3 years isRs22000 and the normal rate of return in the business is 8% calculate goodwill at 3years purchase of the profits
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Answer:
Value of goodwill at 3 years' purchase of super profit = ₹10,000 × 3 years purchase = ₹30,000
Explanation:
Capital employed = ₹1,50,000
Normal rate of return = 8%
So Normal profit = Capital Employed × Nrr/100
= ₹1,50,000 × 8/100
= ₹12,000
Average Profit = ₹22,000
Super Profit = Average Profit - Normal Profit
= ₹22,000 - ₹12,000
= ₹10,000
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