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The capitalised cost of a project with an equivalent annual cost of A at rate i is

  • A.A multiplied by i
  • B.A divided by one plus i
  • C.A multiplied by the number of periods
  • D.A divided by i

Answer: D

It is the limiting case of the series present worth factor as the number of periods tends to infinity, the factor tending to one over i. The interest on that principal exactly meets the annual cost for ever, leaving the capital intact.

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