Sarthaks Test
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A and B are equal partners. They decide to admit C for 1/3rd share. For the purpose of admission of C, goodwill of the firm is to be valued at four years’ purchase of super profit. Average capital employed In the firm is Rs.1,50,000. Normal rate of return may be taken as 15% p.a. Average profit of the firm is Rs.40,000. Calculate value of goodwill.

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Average profit = Normal Profit + super profit

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