Page 223 - Corporate Finance PDF Final new link

BRILLIANT’S Long Term Financing and Valuation of Goodwill & Shares 223

Year ended 31 March: 2013 / 31 ‘mM©, 2013 H$mo g‘má df©
` 1,28,000; 2014: ` 1,44,000; 2015: `1,72,000; 2016: ` 1,80,000.
Standard rate of return on capital employed in this type of business is 8%.
ì¶mnma Ho$ Bg àH$ma na à¶w³V H¡${nQ>b na [aQ>Z© H$s ñQ>¢S>S>© aoQ> 8% h¡&
Calculate the value of goodwill of the above business at three year's purchase of the average
super profits for the four years assuming (i) that each year’s profit is immediately withdrawn in full
by the proprietor and (ii) the weights to be assigned to the profits for the purpose of averaging are:
Mma df© Ho$ {bE EdaoO gwna àm°{’$Q²>g H$s VrZ df© H$s nM}g na Cnamo³V ì¶mnma H$s JwS>{db H$s d¡ë¶y H$s JUZm
H$s{OE, ‘mZm J¶m h¡ {H$ (i) à˶oH$ df© bm^ H$mo n«moàm¶Q>a Ûmam VËH$mb nyam {ZH$mb {b¶m OmVm h¡ VWm (ii) EdaoqOJ Ho$
CÔoí¶ Ho$ {bE bm^ H$mo Amd§{Q>V doQ²>g h¢…
Year Ending on 31 March
(31 ‘mM© H$mo g‘má df©) : 2013 2014 2015 2016

Weight (doQ>) : 1 1.5 2 2.5
Ignore income tax / B§H$‘ Q>¡³g H$s AdhobZm H$s h¡&
Solution: NPP
1. Calculation of Trading Profit:

Year ending on 31 March 2013 (`) 2014 (`) 2015 (`) 2016 (`)
Profit 1,28,000 1,44,000 1,72,000 1,80,000
Less: Income on Investment 8,000 8,000 8,000 8,000
Trading Profits 1,20,000 1,36,000 1,64,000 1,72,000

2. Calculation of Weighted Average Profit
Particulars 2013 (`) 2014 (`) 2015 (`) 2016 (`) Total (`)

Trading Profits 1,20,000 1,36,000 1,64,000 1,72,000 5,92,000
Weight 1 1.5 2 2.5 7
Product 1,20,000 2,04,000 3,28,000 4,30,000 10,82,000

` 10,82,000
Weighted Average Profits = = ` 1,54,571
7
3. Calculation of Capital Employed:

Particulars `
Fixed Assets 3,60,000
Current Assets 4,88,160
8,48,160
Less: Creditors 1,52,160
6,96,000