How does the market situation affect the value of Goodwill of a firm?

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Solution

Market Situation is very important in the valuation of goodwill of a firm. Goodwill, in the economic terms, is the capacity of a firm to earn in future based on it's past performance. If the market situation implies that there is no future for the firm, valuation of goodwill is useless.
When the risk prevalent in the market is low, the goodwill created by the firm is high.

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