The correct answer is A. Rs. 7,500.
Goodwill is an intangible asset that arises when a company is purchased for more than the fair value of its net assets. It is often referred to as the “going concern value” of a business.
In this case, X and Y made a profit of Rs. 5,000 on a capital of Rs. 25,000. This gives an average rate of return on capital of 20%. If the business is valued at three year purchase, then the goodwill will be equal to three times the average rate of return on capital, or Rs. 7,500.
Option B is incorrect because it is the value of the capital invested by X and Y. Option C is incorrect because it is the value of the profit made by X and Y. Option D is incorrect because it is the value of the goodwill if the business is valued at two year purchase.