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 .....

₹4,00,000

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