Average profits of a firm during the last few years were ₹ $\displaystyle 3,20$,000. The normal rate of return in a similar business is $\displaystyle 10$%. If the goodwill of the firm is ₹ $\displaystyle 8,00,000$ at four years purchase of super profit, find the capital employed by the firm.

Goodwill= Super profit x Number of years’ purchase ……………………..½ ₹$\displaystyle 8,00,000$= Super profit x $\displaystyle 4$ Super Profit = ₹$\displaystyle 8,00,000$/$\displaystyle 4$ = ₹$\displaystyle 2,00,000$ ……………………………….…..½ Average profit= ₹ $\displaystyle 3,20,000$ Super Profit = Average Profit – Normal Profit Normal profit= Average Profit – Super profit Normal profit =₹$\displaystyle 3,20,000$ –₹$\displaystyle 2,00,000$ = ₹$\displaystyle 1,20,000$…………………….…..1 $\displaystyle 8$ Normal profit = Normal Rate of Return x Capital Employed $\displaystyle 100$ ₹$\displaystyle 1,20,000$ =$\displaystyle 10$/$\displaystyle 100$ x Capital Employed Capital Employed = $\displaystyle 100$/$\displaystyle 10$ x ₹$\displaystyle 1,20,000$ = ₹ $\displaystyle 12,00,000$ …………………………..……………..1