The correct answer is A. 25%.
Return on investment (ROI) is a measure of the profitability of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.
In this case, the net profit after tax is Rs. 3,25,000. The rate of income tax is 50%. This means that the income tax paid is Rs. 1,62,500. The 12.5% convertible debentures of Rs. 100 each are Rs. 4,00,000. The fixed assets (at cost) are Rs. 12,30,000. The depreciation up-to-date is Rs. 2,30,000. The current assets are Rs. 7,50,000. The current liabilities are Rs. 3,50,000.
The return on investment is calculated as follows:
ROI = (Net profit after tax – Income tax paid) / (Cost of investment + 12.5% convertible debentures + Fixed assets – Depreciation up-to-date + Current assets – Current liabilities)
ROI = (3,25,000 – 1,62,500) / (4,00,000 + 12,30,000 – 2,30,000 + 7,50,000 – 3,50,000)
ROI = 25%
Therefore, the return on investment is 25%.