Average profit = Rs 40,000, Capital employed = Rs 2,00,000 Normal rate

1.	Average profit = Rs 40,000, Capital employed = Rs 2,00,000 Normal rate of return = 10%, present value = Rs 2.487 Calculate value of goodwill by Annuity Method.
Answer» Normal Profit = Capital Employed x N.R.R. 2,00,000 x \(\frac{10}{100}\) = Rs 20,000 Super profit = Average Profit – Normal Profit = 40,000 – 20,000 = Rs 20,000 Goodwill = 20,000 x 2.487 = Rs 49,740

Average profit = Rs 40,000, Capital employed = Rs 2,00,000 Normal rate of return = 10%, present value = Rs 2.487 Calculate value of goodwill by Annuity Method.

Answer»

Normal Profit = Capital Employed x N.R.R.

2,00,000 x \(\frac{10}{100}\) = Rs 20,000

Super profit = Average Profit – Normal Profit

= 40,000 – 20,000 = Rs 20,000

Goodwill = 20,000 x 2.487 = Rs 49,740