What is the formula to calculate goodwill under the capitalisation method?

16. What is the formula to calculate goodwill under the capitalisation method?

  1. Super profits multiplied by the rate of return
  2. Average profits multiplied by the rate of return
  3. Super profits divided by the rate of return
  4. Average profits divided by the rate of return

Answer: C) Super profits divided by the rate of return

Explanation:

The capitalization rate is a productivity metric used to decide the profit from a venture of land property. The equation for the rate of return is determined as networking pay partitioned by the current market worth of the resource.

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