Assets such as machinery cannot be replaced at their historical cost, but must be purchased at the current market value.
When inflation occurs, historical cost would not take account of rising prices of equipment.
The rate of profit would be overestimated, using lower historical cost for computing the value of capital invested.
This "new" rate of profit (r'), which tends to fall, would be measured as At the beginning of a "year" (possibly another length of time period, in this case other numerical values will arise) the capitalist has to invest an amount of capital.
For example, he must invest: Now, it is assumed that during the year the capitalist can produce and sell commodities at a total price of 300 €.