CUET Preparation Today
How is normal profit calculated while valuing goodwill? |
Capital Employed × (Normal Rate of Return/100) Capital Employed + (Normal Rate of Return/100) Capital Employed / (Normal Rate of Return x 100) Capital Employed × (Normal Rate of Return + 100) |
Capital Employed × (Normal Rate of Return/100) |
The correct answer is option 1- Capital Employed × (Normal Rate of Return/100). Normal profit is the minimum profit that a business needs to earn to cover the cost of capital. It is usually calculated as a percentage of the capital employed. So, the right formula to calculate the normal profit is Capital Employed × (Normal Rate of Return/100). |
