the project is indetermined
s, to
Year 2 (R₂)
Calculation of the Marginal Efficiency of Capital (MEC) can be illustrated by the
ds schedule presented below:
Acquisition Year 1 (R₁)
s f
Project
on
ativ
wh
ent
A
B
C
D
Investment
Cost
10,000
10,000
10,000
10,000
of Assuming a 6% market rate of interest
Sto By applying the formula:
R₂
or PV =
R₁
+
1+r (1+r)²
> C............. Eq II
10,000
10,000
3,762
5,762
evel and
te NPV = Net Present Value = PV-C > O
46
0
1,100
7,762
5,762