Question
A firm values goodwill under 'Capitalisation of Profits' method. Average profit of the firm for past 4 years has been determined at Z 1,00,000 (before
A firm values goodwill under 'Capitalisation of Profits' method. Average profit of the firm for past 4 years has been determined at Z 1,00,000 (before tax). Capital employed in the business is Z 4,80,000 and its normal rate of return is 12%. Tax rate is 28% on average. Value of Goodwill based on capitalisation of average profit will be:
(A) Z1,20,000
(B) Z6,00,000
(C) 25,00,000
(D) 24,60,000
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The correct answer is D 2460000 The formula for valuing goodwill under the capita...
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Finance for Executives Managing for Value Creation
Authors: Gabriel Hawawini, Claude Viallet
4th edition
9781133169949, 538751347, 978-0538751346
