Start Video | Prof. Ram M. Shrestha
#08 06/21/2007 |

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- A Capital Recovery Factor (CRF) converts a present value into a stream of equal annual payments over a specified time, at a specified discount rate (interest).

- The value of an equal payment (A) to be made in each of n periods here is given by:

A = P [i(1+i)n]/[(1+i)n-1]

That is, A = P x CRF

Where, CRF= capital recovery factor = [i(1+i)n]/[(1+i)n-1]

- The capital recovery factor can be interpreted as the amount of equal (or uniform) payments to be received for n years such that the total present value of all these equal payments is equivalent to a payment of one dollar at present, if interest rate is i.