The total capital employed in the company is ?8,00,000 a reasonable rate of return is 15%and the profit of the year is 412,00,000. The value of goodwill of the company as per thecapitalization method will be

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The capitalization method calculates goodwill by subtracting the capitalized value of average profits from the actual capital employed. Here, the capitalized value of profits is (4,12,00,000 / 0.15) = 27,46,66,667. Subtracting the capital employed (8,00,000) gives the goodwill value of 7,20,00,000.

The Total Capital Employed in the Company Is ?8,00,000 a Reasonable