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
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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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