Marginal resource rents grow fastest for the stock with the highest MC.
YEAR
0
1
2
3
4
5
6
7
8
9
10
0.02
PRICE
$1,000.00
$1,020.00
$1,040.40
$1,061.21
$1,082.43
$1,104.08
$1,126.16
$1,148.69
$1,171.66
$1,195.09
$1,218.99
MC1
$800.00
$800.00
$800.00
$800.00
$800.00
$800.00
$800.00
$800.00
$800.00
$800.00
$800.00
STOCK 1:
RENT1
$200.00
$220.00
$240.40
$261.21
$282.43
$304.08
$326.16
$348.69
$371.66
$395.09
$418.99
IRR1
10.0%
9.3%
8.7%
8.1%
7.7%
7.3%
6.9%
6.6%
6.3%
6.0%
MC2
$667.00
$667.00
$667.00
$667.00
$667.00
$667.00
$667.00
$667.00
$667.00
$667.00
$667.00
STOCK 2:
RENT2
$333.00
$353.00
$373.40
$394.21
$415.43
$437.08
$459.16
$481.69
$504.66
$528.09
$551.99
IRR2
6.0%
5.8%
5.6%
5.4%
5.2%
5.1%
4.9%
4.8%
4.6%
4.5%
MC3
$500.00
$500.00
$500.00
$500.00
$500.00
$500.00
$500.00
$500.00
$500.00
$500.00
$500.00
STOCK 3:
RENT3
$500.00
$520.00
$540.40
$561.21
$582.43
$604.08
$626.16
$648.69
$671.66
$695.09
$718.99
MC3
$500.00
$500.00
$500.00
$500.00
$500.00
$500.00
$500.00
$500.00
$500.00
$500.00
$500.00
STOCK 3:
RENT3
$500.00
$490.00
$480.10
$470.30
$460.60
$450.99
$441.48
$432.07
$422.74
$413.52
$404.38
IRR3
4.0%
3.9%
3.9%
3.8%
3.7%
3.7%
3.6%
3.5%
3.5%
3.4%
Marginal resource rents are also most volatile for the stock with the highest MC.
YEAR
0
1
2
3
4
5
6
7
8
9
10
-0.01
PRICE
$1,000.00
$990.00
$980.10
$970.30
$960.60
$950.99
$941.48
$932.07
$922.74
$913.52
$904.38
MC1
$800.00
$800.00
$800.00
$800.00
$800.00
$800.00
$800.00
$800.00
$800.00
$800.00
$800.00
STOCK 1:
RENT1
$200.00
$190.00
$180.10
$170.30
$160.60
$150.99
$141.48
$132.07
$122.74
$113.52
$104.38
IRR1
-5.0%
-5.2%
-5.4%
-5.7%
-6.0%
-6.3%
-6.7%
-7.1%
-7.5%
-8.0%
MC2
$667.00
$667.00
$667.00
$667.00
$667.00
$667.00
$667.00
$667.00
$667.00
$667.00
$667.00
STOCK 2:
RENT2
$333.00
$323.00
$313.10
$303.30
$293.60
$283.99
$274.48
$265.07
$255.74
$246.52
$237.38
IRR2
-3.0%
-3.1%
-3.1%
-3.2%
-3.3%
-3.3%
-3.4%
-3.5%
-3.6%
-3.7%
IRR3
-2.0%
-2.0%
-2.0%
-2.1%
-2.1%
-2.1%
-2.1%
-2.2%
-2.2%
-2.2%
MC leverages the growth in resource rents.
10%
$800
8%
$600
6%
$400
4%
RENT1
RENT2
RENT3
IRR1
IRR2
IRR3
$200
$0
0
2
4
year
6
8
2%
0%
10
implicit rate of return
marginal rent
$1,000