In the equation just shown, the 1.1 divisors represent the 10% interest rate. If the interest rate had been higher, e. g., 20%, then the divisors would have been larger (1.2 instead of 1.1), and the calculated value would have been lower. This conclusion can be seen to be entirely reasonable, when one remembers that higher interest rates are associated with higher time preferences. If investors show an unusually high preference for short-range over long-range returns, then they will attach less value to the services that a durable good can offer in the remote future. The stock prices of companies whose assets are composed in large part of durable goods are especially sensitive to fluctuations in interest rates.

The machine's "capital value" of $93.65, it is readily seen, must be its equilibrium price in the free market (in the absence of risk and uncertainty). If the machine's price fell below this value, then investors could realize a profit by buying additional units of it and applying them to production; the resultant increased demand would bid the price up. On the other hand, if the price rose above this value, they would begin to suffer losses on their marginal units of the good and would seek to sell them, bringing the price down.