Question

The net tangible assets of a business worth ₹300000 and the average profits expected to be earned in future years after making neccessary adjustment are ₹60000. Assuming that 15% is the reasonable return on capital employed in the business,find out the value of goodwill.

Answer 1

Answer:

100000

Explanation:

capitalised value of the firm = (avg profit x 100)/ normal rate of return

                                               = (60000 x 100) / 15

                                               = 400000

net assets = 300000

goodwill = capitalised value - net assets

              = 400000 - 300000

              = 100000