Average profits of a firm during the last few years were ₹ 80,000. The normal rate of return in a similar business is 10%. If the goodwill of the…

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