The capital of a firm of Arpit and Prajwal is Rs. 10,00,000. The marke – InterviewSolution

1.	The capital of a firm of Arpit and Prajwal is Rs. 10,00,000. The market rate of return is 15% and the goodwill of the firm has been valued Rs. 1,80,000 at two years purchase of super profits. Find the average profits of the firm.
Answer» (i) Super profit = Value of goodwill /Number of years purchase = (180000/2) = 90000 (ii) Normal Profit = Capital employed X Normal rate of return /100 = (1000000 X 15/ 100) = 150000 (iii) Average Profit = Normal Profit + Super profit = 150000 + 90000 = 240000

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