Given Information:
- Capital Employed = Rs. 5,00,000
- Normal Rate of Return = 10%
Formula:
Normal Profit = Capital Employed × 100Normal Rate of Return
Calculation:
Normal Profit = 5,00,000 × 10010
Normal Profit = Rs. 50,000
The normal profit represents the profit that should be earned on the capital employed at the normal rate of return prevailing in the industry. The actual profits for the past five years (Rs. 40,000, Rs. 58,000, Rs. 55,000, Rs. 70,000, and Rs. 85,000) are not required for calculating normal profit. These actual profits would be used to calculate average profit or super profit by comparing them with the normal profit.
Answer: Option 3 - Rs. 50,000