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If Average Capital Employed in a firm is Rs. 9,00,000 ; Average Profits Rs. 2,80,000 and Normal rate of return is 20%, then value of goodwill as per capitalisation of super profits is :

Solution

✅ Correct Option: 2

Normal Profit = 9,00,000 x 20% = 1,80,000.

Super Profit = 2,80,000 - 1,80,000 = 1,00,000.

Goodwill (Capitalisation of Super Profit) = Super Profit x 100 / Normal Rate of Return = 1,00,000 x 100 / 20 = 5,00,000.

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