Profitability measure — simple rate of return: A project costs ₹10,00,000 (total investment) and earns ₹1,50,000 profit each year for 10 years. What is the simple rate of return on investment?

Introduction / Context:
The simple rate of return (accounting rate of return) is a quick screening metric defined as annual profit divided by total investment, expressed as a percentage. It ignores time value but is frequently used for preliminary comparisons.

Given Data / Assumptions:

• Total investment (cost) = ₹10,00,000.
• Annual profit = ₹1,50,000 (assumed uniform).
• Project life = 10 years (not required for the simple rate).

Concept / Approach:
Simple rate of return = (Annual profit / Total investment) * 100%. Do not discount cash flows for this measure.

Step-by-Step Solution:
Compute ratio: 1,50,000 / 10,00,000 = 0.15Convert to percent: 0.15 * 100% = 15%

Verification / Alternative check:
If payback is considered, payback time ≈ 10,00,000 / 1,50,000 ≈ 6.67 years, which is consistent with a 15% per-year profit ratio (but payback is a different metric).

Why Other Options Are Wrong:
10% and 1.5% use incorrect denominators or decimal placement; 150% confuses ratio with percent.

Common Pitfalls:
Using cash inflow instead of profit, or mixing after-tax and before-tax figures without consistency.

Final Answer:
15%