Average profits of a firm during the last few years were ₹ $\displaystyle 80$,000. The normal rate of return in a similar business is $\displaystyle 10$%. If the goodwill of the firm is ₹ $\displaystyle 2,00,000$ at four years purchase of super profit, find the capital employed by the firm.

Goodwill= Super profit x Number of years’ purchase………………..……..….. ₹$\displaystyle 2,00,000$= Super profit x $\displaystyle 4$ …………………………..………………½ Super Profit = ₹$\displaystyle 2,00,000$/$\displaystyle 4$ = ₹$\displaystyle 50,000$ Average profit= ₹$\displaystyle 80,000$ Super Profit = Average Profit – Normal Profit Normal profit= Average Profit – Super profit ð Normal profit = ₹$\displaystyle 80,000$ – ₹ß$\displaystyle 50,000$ = ₹$\displaystyle 30,000$…………………………..1 Capital Employed = Normal profit x $\displaystyle 100$/ Normal Rate of Return ð Capital Employed = $\displaystyle 100$/$\displaystyle 10$ x ₹$\displaystyle 30,000$ = ₹$\displaystyle 3,00,000$ ……………………………………..……..1