INVESTMENT OPPORTUNITY PRINCIPLES

would yield a return of say 2 %oso or 2 per cent. Inasmuchas 2 per cent is less than the rate of interest, this alterna-tive would be rejected. Thus, equilibrium is found wherethe rate of return on cost equals 5 per cent, the rate of in-terest.

The case may be illustrated by Chart 16. Let AB repre-sent the number of cords of wood on an acre of growing

6 Tears

5 Years

CHART 16

Selecting the Time for Cutting a Forest.

trees; let A' B' represent the amount of wood which maybe expected at the end of five years; let A" B" representwhat may be expected in ten years and so on for succes-sive years until the forest reaches its maximum growth,MN, at the end of AM years. The percentage-slope, orrate of ascent, 4 of the curve BN at any point, therefore,

* The Nature of Capital and Income, pp. 221-222.

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