Step 1: The cash flow diagram for the given problem is shown in Fig. 5.2.
Step 2: The P.W. of the net receipts at an interest rate of i^{\prime } is calculated as:

Step 3: The P.W. of the net expenditures at an interest rate of i^{\prime } is calculated as:

Step 4: The net present worth N.P.W. is obtained as:

Step 5: 0 =₹53,000\left(P/A,i^{\prime}\% ,5\right)+₹30,000\left(P/F,i^{\prime}\% ,5\right)-₹1,05,815.4-₹30,000\left(P/A,i^{\prime}\% ,5\right)

The equation given at Step 5 normally involves trial-and-error calculations until the i^{\prime }\% is found. However, since we do not know the exact value of i^{\prime }\%, we will probably try a relatively low i^{\prime }\%, such as 5\%, and a relatively high i^{\prime }\%, such as 12\%.

At i^{\prime }\% = 5\%:

At i^{\prime }\% = 12\%:

Since we have both a positive and a negative P.W. of net cash flows, linear interpolation can be used as given below to find an approximate value of i^{\prime }\%

i^{\prime }\% = 10.22\%, which is approximately equal to 10\%.

Step 6: Since the value of i^{\prime }\% = M.A.R.R., the investment in the project is economically barely justified.

Note: Let us check whether the value of N.P.W. at i^{\prime } = 10\% is 0.

At i^{\prime }\% = 10\%:

Thus i^{\prime } = 10\% which is equal to the given M.A.R.R. and therefore, the investment in the project is economically barely justified.