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Q.3 X Ltd wants to purchase the business of Y Ltd. Profit of Y Ltd for the past four years were Rs. 35,000 Rs. 60,000,

Q.3 X Ltd wants to purchase the business of Y Ltd. Profit of Y Ltd for the past four years were Rs. 35,000 Rs. 60,000, Rs. 50,000 and Rs. 55,000 respectively. You are informed that Rent at Rs. 4000 p.a. and manager salary @ Rs. 2,000 per month which have been charged against profit of Y Ltd. will not be paid by X Ltd. Average capital employed by Y Ltd. was Rs. 6,00,000 and normal rate of return of the same type of business was 10%. Calculate the value of Goodwill by capitalization method.

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