The average profit for last five years of a firm of Suman and Dhawan was ₹ $\displaystyle 6,00$,000. The normal rate of return in a similar business is $\displaystyle 10$%. Goodwill of the firm is valued at ₹ $\displaystyle 40,00,000$ calculated by capitalisation of super profit. Find out the amount of capital employed by the firm.

• Goodwill of the firm = Super Profit x $\displaystyle 100$ Normal rate of return $\displaystyle 40,00,000$ = Super Profit x $\displaystyle 100$ $\displaystyle 10$ Super profit = `$\displaystyle 4,00,000$ • Super Profit = Average Profit – Normal Profit $\displaystyle 4,00,000$ = $\displaystyle 6,00,000$ – Normal Profit Normal Profit = `$\displaystyle 2,00,000$ • Normal Profit = Normal Rate of Return x Capital Employed $\displaystyle 100$ $\displaystyle 2,00,000$ = $\displaystyle 10$ x Capital Employed $\displaystyle 100$ = `$\displaystyle 20,00,000$ Capital Employed