Fundamental Assumption Example:

You are a businessman (or businesswoman) considering the purchase of new piece of capital, more specifically a new lawn mower. You estimate that with the new lawn mower you will be able to mow two additional lawns per day, adding approximately $40 per day to income. You further estimate that the return on you investment (ROI) will be 6%. Do you buy the lawn mower?

Note: the ROI is the expected marginal benefit of the purchase. In order to make the decision, we must compare the expected marginal benefit of the investment with the expected marginal cost, the market interest rate that we must pay to borrow the purchase price.