EXAMPLE 1

EXAMPLE 1

Published on 8 May 2021
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Thanasangari Latchumanan
Thanasangari's Personal Gallery
Transcript
00:01
WHAT IS CAPITALIZED COST ?
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Capitalized cost is defined as the present worth of a constant annual cost over an infinite analysis period
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Capitalized Cost, P = A/i
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It can be shown that the factor (P/A, i %, n = infinity) is equal to (1 / i ), with the interest rate i in decimal form
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EXAMPLE 1 :
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Determine the capitalized cost at 15% interest of a structure with an initial cost of $200,000 and annual operating and maintenance costs of $40,000.
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SOLUTION:
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P = $200,000 + $40,000 (P/A,15%,n = infinity) = $200,000 + $40,000 (1 / 0.15 ) P = $200,000 + $266,667 = $466,667