Model: Goodwill—Valuation of—Comprehensive The following particulars are available in respect of the business of X Ltd: Profits earned for the years:
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Rs.10,00,000 Normal rate of return: 10 % Capital employed: Rs.50,00,000 Present value of an annuity of Rs.1 for 5 years as 10% = Rs.3.78. The profits included non-recurring profits on an average basis of Rs.50,000 a year.
You are required to calculate the value of goodwill: As per 5 years’ purchase of super profits As per capitalization of super profits method As per annuity method