The normal commercial yield on capital invested in a business is 10% p.a. The net capital invested in the business is ₹ 5,00,000. Amount of goodwill. Based on 3 years purchase of super profits is ₹ 30,000. The average profits will be ______.

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The normal commercial yield on capital invested in a business is 10% p.a. The net capital invested in the business is ₹ 5,00,000. Amount of goodwill. Based on 3 years purchase of super profits is ₹ 30,000. The average profits will be ₹ 60,000. Explanation: Given: Normal rate of return = 10% Capital employed = ₹ 5,00,000 Normal profits = ₹ 5,00,000 $\times$ 10% = ₹ 50,000 Goodwill = ₹ 30,000 (based on 3 years’ purchase of super profits) Goodwill = Super Profits $\times$ Number of years’ purchase 30,000 = Super Profits $\times$ 3 Super Profits = 10,000 Average Profits = Normal Profits + Super Profits = 50,000 + 10,000 = 60,000

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