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C brings ₹100000 capital for (1/4) share. What is the implied value of the firm based on total capital?

Answer and explanation

Correct answer: ₹400000

The correct answer is option A: ₹400,000. C brings ₹100,000 for a 1/4 share. If one-fourth of the firm’s implied total value is ₹100,000, the complete value is four times that amount: ₹100,000 × 4 = ₹400,000. In formula form, total value = amount representing the share ÷ share fraction = ₹100,000 ÷ 1/4 = ₹400,000. Option A is correct. Option B, ₹25,000, divides by 4 in the wrong direction and is smaller than the value of the 1/4 share. Option C, ₹300,000, does not make one-fourth equal to ₹100,000; one-fourth of it is ₹75,000. Option D, ₹500,000, would make one-fourth equal to ₹125,000. The question asks for the implied total value based on the capital relationship, not a separate goodwill valuation. Memory cue: when a fraction’s value is given, divide by that fraction to find the whole.

Related tags

Hidden GoodwillImplied ValueNumerical

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