Read the following information and answer the question.

Company XYZ Ltd.
TOTAL FUND USED = 50 LAKHS

What will be the earning after tax in situation I ?

₹4,00,000

The correct answer is option 4- ₹4,00,000.

In situation I, there is no debt in total ₹50 lakh funds so there is no interest payment.

         EBIT = 5,00,000 
less: Interest = NIL
         EBT 5,00,000 (Earnings before taxes)
less: Tax 1,00,000 (5,00,000 X 20/100)
         EAT 4,00,000

Thus, Earning after tax is ₹4,00,000.