Capital recovery factor


Capital recovery factor

A capital recovery factor is the ratio of a constant annuity to the present value of receiving that annuity for a given length of time. Using an interest rate "i", the capital recovery factor is:

CRF = frac {i(1+i)^n}{(1+i)^n-1}

where "n" is the number of annuities received. [ [http://faculty.engineering.ucdavis.edu/jenkins/CBC/Calculator/CalculatorBackground.pdf Calculator by Jenkins at University of California] ]

This is related to the annuity formula, which gives the present value in terms of the annuity, the interest rate, and the number of annuities.

If "n" = 1, the CRF reduces to 1+"i". As "n" goes to infinity, the CRF goes to "i".

References


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