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218 Corporate Finance BRILLIANT’S

After calculating the value of the firm in Cnamo³V àH$ma go g§ñWm H$s d¡ë¶y H$s JUZm H$aZo Ho$
the above manner, the net assets of the busi- níMmV² {~OZog ¶y{ZQ> H$m ZoQ> AgoQ²>g Bggo KQ>m¶m OmVm
ness unit is deducted from this and the balance h¡ VWm ~¡b|g JwS>{db H$m ‘mZ hmoVm h¡&
is the value of the goodwill.
(b) Capitalization of Super Profit Method: (b) gwna àm°{’$Q> H$s H¡${nQ>bmBOoeZ ‘oWS>… Bg
Under this method, goodwill is calculated by {d{Y Ho$ A§VJ©V JwS>{db H$mo gh‘V aoQ> na gwna àm°{’$Q²>g
capitalizing super profits at agreed rate: H$mo H¡${nQ>bmBO H$aHo$ JUZm {H$¶m OmVm h¡…
Super Profit
Goodwill   100
Normal Rate of Return
4. Annuity method: When a business is 4. Eݶy{Q> ‘oWS>… O~ EH$ {~OZog nM}g {H$¶m OmVm
purchased, Goodwill is paid by the purchaser h¡, {~OZog Ho$ gwna àm°{’$Q²>g Ho$ {bE {~OZog Ho$ nM}g H$m
at the time of purchase of business for the su- g‘¶ na nM}ga Ûmam ^wJVmZ {H$¶m OmVm h¡ {H$ÝVw ¶o gwna
per profits of business, but these super profits
are made in future years. àm°{’$Q²>g ^{dî¶ Ho$ dfm] ‘| {H$¶o OmVo h¢&
Suppose ` 30,000 goodwill is paid today ‘mZm {H$ < 30,000 JwS>{db H$m AmO ^wJVmZ {H$¶m
but this amount, purchaser will get in the form J¶m h¡ {H$ÝVw ¶h am{e nM}ga nhbo df© ‘| < 10,000,
of super profits as ` 10,000 in the first year,
another ` 10,000 in the second year and an- AJbo < 10,000 Xÿgao df© ‘| VWm AJbo < 10,000
other ` 10,000 in the third year. Purchaser will Vrgao df© ‘| àmá H$aoJm& nM}ga < 30,000 na ã¶mO H$s
lose the amount of interest over ` 30,000. An- am{e Imo XoJm& Eݶy{Q> ‘oWS> EH$ ‘oWS> h¡ {OgHo$ Ûmam ã¶mO
nuity method is a method by which above men- H$s D$na ~Vm¶r J¶r hm{Z H$s j{Vny{V© H$s Om gH$Vr h¡&
tioned loss of interest can be compensated.
Under this method, If the value of annuity Bg {d{Y Ho$ A§VJ©V ¶{X Eݶy{Q> H$m ‘yë¶ Zht {X¶m
is not given, the following formula can be ap- J¶m h¡ Vmo JwS>{db Ho$ ‘yë¶m§H$Z Ho$ {bE {ZåZ{b{IV ’$m°‘y©bm
plied for valuing goodwill: à¶wº$ H$a gH$Vo h¢…

a  1 
V   1 n 
i  (1 i) 
Where,
V = value of the goodwill; a = average super profit;
i = rate of interest per annum; n = number of years.
SOLVED PRACTICAL QUESTIONS

AVERAGE PROFIT METHOD / EdaoO àm°{’$Q> ‘oWS>

Illustration 3.1.10

Cat Ltd. agreed to purchase business of a sole trader. For that purpose, goodwill is to be
valued at 3 year's purchase of the average profits of last 5 years.
H¡$Q> {b{‘Q>oS> EH$ gmob Q´>oS>a H$m ì¶mnma IarXZo Ho$ {bE gh‘V hþAm h¡& Bg CÔoí¶ Ho$ {bE JwS>{db {nN>bo 5 dfm]
Ho$ EdaoO àm°{’$Q²>g Ho$ 3 df© Ho$ nM}g na ‘yë¶ bJm¶m OmZm h¡&