Explain The Applications Of Classical Theory Of Capital?

It is not so easy to explain the classical theory of capital. Because capital theory needs some amplifications and qualifications to be account for important realistic features of economic life.
Investors always keep a sharp eye out for inflation and taxes. Recall that inflation tends to reduce quantity of goods you can buy with your dollars. Therefore, we want to calculate the real interest rate or the real return to our investments, removing the effect of the changing yardstick of money. Another important feature is taxes. Part of our income goes to the government to pay for public goods and other government programs.
Second thing is technological distribution. A deeper complexity involves technological change. Historical studies show that inventions and discoveries raise the return on capital and thereby affect equilibrium interest rates.
Third thing is uncertainty and expectations. The final qualification concerns the risks that exist in investment decisions. In real life no one has a crystal ball to read the future. All investments, resting as they do on estimates of future earnings must necessarily be guesses about future costs and pay-offs.