If capital employed is five lakh rupees and normal rate of return is ten percent what is normal profit?

Correct answer: Rupees 50000

The direct answer is option A: ₹50,000. Normal profit is the ordinary return expected on the capital employed at the normal rate of return. The formula is normal profit = capital employed × normal rate of return. Capital employed is ₹5,00,000 and the rate is 10%, which means 10 per 100. Convert 10% to decimal form: 10/100 = 0.10. Now calculate ₹5,00,000 × 0.10 = ₹50,000. Option A is correct. Option B, ₹5,00,000, simply repeats the capital employed and ignores the rate. Option C, ₹10,000, does not result from taking 10% of ₹5,00,000; it is too small. Option D, ₹1,00,000, would represent 20% of ₹5,00,000, not 10%. In goodwill questions, normal profit is compared with actual or average profit to find super profit. The exam cue is to attach the percentage to the capital: first write capital × rate ÷ 100, then substitute the numbers. Do not confuse normal profit with capital employed; one is an earning amount and the other is the investment base.