Calculate the value of goodwill on basis of 3 years' purchase of the super profit if average profit is ₹20,000 and capital investment of the firm is ₹60,000. The normal return on capital is 10%.

₹42,000

The correct answer is option 2- ₹42,000.

Normal profit = 60,000 X 10/100
                     = ₹6,000

Super profit = Average profit - Normal profit
                   = 20,000 - 6,000
                   = ₹14,000

Goodwill = 14,000 X 3
             = ₹42,000