Radha Ltd has invested ₹1,00,000 in the business. Out of which ₹70,000 is equity and ₹30,000 is debt. Net Profit after tax is ₹24,000. Tax rate is 20%. Calculate ROI.
Answer & explanation
Correct answer: option 3
The correct answer is option 3- 30%.
80% profit = 24,000
20% = 24,000/80 x 20
= 6,000
Tax rate is 20% i.e. = 6000
Profit before tax = (24,000 + 6,000)
= 30,000
ROI = EBIT /Total Investment × 100
ROI = 30,000/100,000 x 100
= 30%