Given:
- Net Profit After Tax = Rs. 60,000
- Long-term debt = Rs. 10,00,000 at 10%
- Tax rate = 40%
Finding Interest on Long-term Debt:
Interest = 10% of Rs. 10,00,000 = Rs. 1,00,000
Working backwards from Net Profit After Tax:
Net Profit After Tax represents profit after deducting both interest and tax. We need to add these back to find Net Profit Before Interest and Tax.
Step 1: Find Net Profit Before Tax (but after interest)
Using the formula: Net Profit After Tax = Net Profit Before Tax × (1 - Tax Rate)
Net Profit Before Tax = 1−Tax RateNet Profit After Tax
Net Profit Before Tax = 1−0.4060,000 = 0.6060,000 = Rs. 1,00,000
Step 2: Find Net Profit Before Interest and Tax
Net Profit Before Interest and Tax = Net Profit Before Tax + Interest
= Rs. 1,00,000 + Rs. 1,00,000 = Rs. 2,00,000
The correct answer is option 3: Rs. 2,00,000