1. The goodwill of a firm is to be worked out at three years’ purchase of the average profits of the last five years which are as follows:
`{:(Year,Profits(Loss)(Rs)),(2012,10000),(2013,15000),(2014,4000),(2015,(5000)),(2016,6000):}`
2. The capital employed of the firm is Rs. 1,00,000 and normal rate of return is 8%, the average profits for last 5 years are Rs. 12,000 and goodwill is to be worked out at 3 years’ purchase of super profits,
3. Rama Brothers earn an average profit of Rs. 30,000 with a capital of Rs. 2,00,000. The normal rate of return in the business is 10%. Using capitalisation of super profits method work out the value the goodwill of the firm.