Question

Profit after Interest and Tax: ₹ 1,05,000; ₹ 5,000, 8% Redeemable Debentures of ₹ 100 each; 10% Preference Shares of ₹ 100 each; ₹ 3,00,000, ₹ 20,000 Equity Shares of ₹ 10 each; Tax Rate 50%. Return on Investment will be ______.

विकल्प

• 20%

• 25%

• 30%

• 15%

Answer 1

Profit after Interest and Tax: ₹ 1,05,000; ₹ 5,000, 8% Redeemable Debentures of ₹ 100 each; 10% Preference Shares of ₹ 100 each; ₹ 3,00,000, ₹ 20,000 Equity Shares of ₹ 10 each; Tax Rate 50%. Return on Investment will be 25%.

Explanation:

Calculation of Capital Employed:

\[\text{8\% Debentures Amount} = 5,000 \times ₹ 100 = ₹ 5,00,000\]

$\text{10\% Preference Share Capital} = ₹ 3,00,000$

$\text{Equity Share Capital} = 20,000 \times ₹ 10 = ₹ 2,00,000$

$$\text{Capital Employed} = \text{Debentures} + \text{Preference Capital} + \text{Equity Capital}$$

$$\text{Capital Employed} = ₹ 5,00,000 + ₹ 3,00,000 + ₹ 2,00,000$$

$${\text{Capital Employed} = ₹ 10,00,000}$$ 

Calculation of Net Profit before Interest and Tax (EBIT):

Net Profit before Tax (PBT):

$$\text{Profit before Tax} = \frac{\text{Profit after Tax}}{1 - \text{Tax Rate}}$$

$$\text{Profit before Tax} = \frac{1,05,000}{1 - 0.50} = \frac{1,05,000}{0.50} = ₹ 2,10,000$$

Interest on Debentures:

$$\text{Interest Expense} = 8\% \text{ of } ₹ 5,00,000 = ₹ 40,000$$

EBIT:

$$\text{EBIT} = \text{Profit before Tax} + \text{Interest}$$

$$\text{EBIT} = ₹ 2,10,000 + ₹ 40,000$$

$${\text{EBIT} = ₹ 2,50,000}$$

$$\text{Return on Investment (ROI)} = \left( \frac{2,50,000}{10,00,000} \right) \times 100 = 25\%$$