Question

The capital invested in a firm is ₹4,60,000 and the rate of return in the similar business is 10%. The firm earns the following profit in the last 4 years:2018 – ₹70,000; 2019 – ₹90,000; 2020 – ₹80,000; 2021 – ₹1,00,000. Calculate the value of goodwill by Capitalisation method. Value of goodwill ?
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Answer 1

Answer:

C.E=460000

NRR=10%

AVG PROFIT= ?

70000+90000+80000+100000×10%=34000

AVG P=340000

N.P= C.E×N.R.R

= 460000×10%

= 46000

S.P= AVG P- N.P

= 34000-46000

=12000

G/W= S.P×No of yrs purchased

= 12000×4

48000

that's the good will of the sum