The profit for the last 5 years of the firm are:

The goodwill of the firm on the basis of 4 years purchase of average profits of 5 years will be:

₹16,00,000

The correct answer is Option (3) - ₹16,00,000.

Total profits = 4,00,000 + 3,00,000 + 3,50,000 + 4,50,000 + 5,00,000
                  = ₹20,00,000

No of years = 5

Average profit = Total profits / No of years
                     = 20,00,000/5
                     = ₹4,00,000

Goodwill = Average profits x No of years purchase
             = 4,00,000 x 4
             = ₹16,00,000