Calculate the value of goodwill on basis of 3 years' purchase of the super profit if average profit is ₹20000 and capital investment of the firm is ₹60000. The normal return on capital is 10%.

₹42000

The correct answer is option 2- ₹42000.

Normal profit = 60000 X 10/100
                     = ₹6000
Super profit = Average profit - Normal profit
                   = 20000 - 6000
                   = ₹14000
Goodwill = 14000 X 3
              = ₹42000