It is the goodwill which is self generated by a firm based on features of the business such as favourable location, loyal customers, etc., Such self - generated goodwill cannot be recorded in the books of accounts.

\(\text { Goodwill }=\frac{\text { Average Profit }}{\text { Normal rate of return }} \times 100=1,50,000 \times \frac{100}{20}=\text { Rs. } 7,50,000\) 
Goodwill = Capitalised value of business - Capital employed
= Rs. 7,50,000 - 5,00,000 
Good will = Rs. 2,50,000

The monopoly condition or limited competition enable the concern to earn high profits which leads to higher value of Goodwill.

No, Goodwill cannot be sold separately. It can be sold along with sale of the business itself. i.e. the excess of purchase consideration of its net assets (assets - liabilities). Sometimes, Goodwill has more value than tangible assets.

Goodwill = Capitalised value of Average profit - Net Assets
Where,
Capitalised value of Average profit = \(\frac{\text { Average Profit }}{\text { Normal rate of return }} \times 100\) 
Net assets = All assets (other than goodwill, Fictitious assets and non trading investments) at their current values less outside liabilities.

A well managed company enjoys high productivity and cost efficiency that leads to higher profits and more Good will.

The firm that produces high value added products or has stable demand will be able to earn more profit and more Good will.

Good will cannotbe seen and touched. It is invisible. Hence it is treated as intangible asset. But it is not a fictitious asset because goodwill has a value and it can be purchased or sold with any other asset.

The monopoly condition or limited competition enables the concern to earn high profits which leads to higher value of goodwill

If the firm enjoys good reputations for its product's quality, there will be higher sales and the value of its goodwill will increase.

Goodwill cannot be seen and touched. It is invisible. Hence it is treated as intangible asset. But it is not a fictitious asset because goodwill has a value and it can be purchased or sold with any other asset.

Number of years purchase means for how many specific years the business will earn same amount of profits because of its past efforts.

Annuity refers to series of uniform cash flow at regular intervals. The table value gives the present value of annuity of rupee one received at the end of every year for a specified number of years.
Annuity factor=\(=\frac { i{ (1+i) }^{ n } }{ { (1+i) }^{ n }-1 } \)
Where, i = interest rate
n = estimated number of yea