A company has ₹10,00,000 Capital Employed and 10% Debentures of ₹5,00,000.
Profit after tax is ₹2,50,000 whereas tax was ₹50,000.
What will be the Return on Investment?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- 35%.
R.O.I = Net profit before interest and tax/ Capital Employed *100
= 3,50,000/10,00,000 x 100
= 35%
Net profit before interest and tax = Profit after tax + tax + interest
= 2,50,000 + 50,000 + 50,000 (10% of 5,00,000)
= 3,50,000