Mahindra set up a factory by investing ₹ 2500000. During the first two years, his profits were 5% and 10% respectively. If each year the profit was on previous year’s capital, calculate his total profit.
Solution:
It is given that
Investment = ₹ 2500000
Rates of profit during first two years = 5% and 10%
We know that
Capital after two years (A) = P (1 + r/100)n
Substituting the values
= 2500000 (1 + 5/100) (1 + 10/100)
By further calculation
= 2500000 × 21/20 × 11/10
= ₹ 2887500
So the net profit = A – P
Substituting the values
= 2887500 – 2500000
= ₹ 387500
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