A business has earned average profit of Rs 1,20,000 during

21 :- A business  has earned average profit of Rs 1,20,000 during the last four years and the normal rate of return in similar business is 15%. If goodwill of the firm is valued at Rs 1,35,000 at 3 years purchased of average super profit, find the capital employed of the firm.

Solution:-  Goodwill = Super profit x No. of years purchased
1,35,000 = (Average profit – Normal profit) x 3
1,35,000/3 = [1,20,000 – (Capital employed x Normal rate of return)]
45,000 = 1,20,000 – (Capital employed x 15%)
Capital employed x 15/100  = 1,20,000 – 45,000
Capital employed = 75,000 x 100/15
Capital employed = Rs 5,00,000