The goodwill of the firm was valued ₹720000 on the basis of 4 years purchase of super profit of the firm. The capital employed of the firm was ₹2500000 and the firm made a profit of ₹480000. Determine the normal rate of return.

12%

Goodwill = Super profit x No of year purchase
720000 = Super profit x 4
Super profit = 720000/4
                   = ₹180000
Super profit = Actual profit - Normal profit
180000 = 480000 - Normal profit
Normal profit = 480000 - 180000
                     = ₹300000
Normal profit = Capital employed x Normal rate of return/100
300000 = 2500000 x normal rate of return/100
Normal rate of return = 300000 x 100/2500000
                                  = 12%