A firm's average annual profit is Rs 50,000. If goodwill is valued at 3 years' purchase of the average profit, what is the value of goodwill?
Answer and explanation
Correct answer: A. Rs 150,000
- Step 1: Goodwill = average profit x number of years' purchase.
- Step 2: 50000 x 3 = 150000.
Answer
Rs 150,000.
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