Profit after interest and tax is ₹1,60,000
10% Long term borrowing ₹20,00,000
Rate of Tax: 20%
Profit before interest and tax will be .....
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹4,00,000.
Profit after interest and tax = ₹1,60,000
10% Long term borrowing = ₹20,00,000
Rate of Tax = 20%
Interest = 20,00,000 x 10/100
= 2,00,000
Profit before tax = 1,60,000 x 100/80
= 2,00,000
Profit before interest and tax = Profit before tax + interest
= 2,00,000 + 2,00,000
= 4,00,000