Interest One important variable that would influence investment is the rate of interest.
Interest is a key cost of investment.
Interest and Profitability Interest is a cost, so we expect that higher interest will mean lower profits. Indeed, the profitability of an investment can be judged by the rate of interest it could pay and still be profitable. An investment will require an outlay now, and will pay out net revenues only over some period in the future. So the way to judge whether the investment is profitable or not is to discount the future net revenues for each year to present value, add them all up, and deduct the initial investment. The Marginal Efficiency of Investment Think of a very small economy in which just five investments are being considered.