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Question : The table given below represents the cost, revenue, and tax rate for XYZ Limited for a period of 8 years. Cost and Revenue are given in INR '000 crore.

Year Revenue Cost Tax rate
Y1 800 600 20%
Y2 1100 850 22%
Y3 1200 900 22%
Y4 1200 950 25%
Y5 1350 1050 30%
Y6 1500 1200 30%
Y7 1600 1240 33%
Y8 1850 1400 15%

Profit for any year = Revenue – Cost
Profit after tax for any year = profit of that year – tax of that year
Tax on any year = tax rate of that year $×$ profit of the year
Which of the following is correct about profit after tax for years Y2, Y6, and Y8?

Option 1: Y8 > Y6 = Y2

Option 2: Y6 > Y2 > Y8

Option 3: Y8 > Y6 > Y2

Option 4: Y6 = Y8 > Y2


Team Careers360 22nd Jan, 2024
Answer (1)
Team Careers360 24th Jan, 2024

Correct Answer: Y8 > Y6 > Y2


Solution : Here all amounts are in 1000 crore.
For Y2, the profit (before taxes) is 1100 – 850 = 250
After taxes, profit is calculated as:
profit $×$ (1 – $\frac{\text{tax %}}{100}$)
= 250 $×$ (1 – $\frac{22}{100}$) = 250 $×$ 0.78 = 195
For the Y2, the profit after taxes is 195.
For Y6, the profit (before taxes) is 1500 – 1200 = 300
For Y6, profit after taxes = 300 $×$ (1 – $\frac{30}{100}$) = 300 $×$ 0.7 = 210
For Y8, the profit (before taxes) is equal to 1850 – 1400 = 450
For Y8, the profit after taxes = 450 $×$ (1 –$\frac{13}{100}$) = 450 $×$ 0.87 = 391.5
So, the profit for Y8 > Y6 > Y2
Hence, the correct answer is Y8 > Y6 > Y2.

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