Question

The supply price of machine is rs16000, and it has a useful economic life of 2 years, and the prospective yield on this machine in each year is rs 7200, then what is the marginal efficiency of capital?

Answer 1

Answer to Question #91171, Economics / Microeconomics

$$SP = \frac{R1}{1+r} + \frac{R2}{(1+r)^2}$$ $$16000 = \frac{7200}{1+r} + \frac{7200}{(1+r)^2}$$ $$let\ a = 1 + r$$ $$a^2 * (16000) - 7200a + 7200 = 0$$ $$a = 0.9325, -0.4825$$ $$r = 0.9325 - 1 = -0.0675 = -6.75\%$$

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