Net Profit after tax Rs. 60,000; 10% Long-term debt Rs.10,00,000; and Tax rate 40%. The net profit before interest and tax is:

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

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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 = $\frac{\text{Net Profit After Tax}}{1 - \text{Tax Rate}}$

Net Profit Before Tax = $\frac{60,000}{1 - 0.40}$ = $\frac{60,000}{0.60}$ = 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