Question:
Jitendra set up a factory by investing Rs 2500000. During the first two successive years his profits were 5% and 10% respectively. If each year the profit was on previous year's capital, compute his total profit.
Solution:
Profit at the end of the first year $=\mathrm{P}\left(1+\frac{\mathrm{R}}{100}\right)$
$=2,500,000\left(1+\frac{5}{100}\right)$
$=2,500,000(1.05)$
$=2,625,000$
Profit at the end of the second year $=\mathrm{P}\left(1+\frac{\mathrm{R}}{100}\right)$
$=2,625,000\left(1+\frac{10}{100}\right)$
$=2,625,000(1.10)$
$=2,887,500$
Total profit $=$ Rs $2,887,500-$ Rs $2,500,000$
$=$ Rs 387,500