When a uniform series is to continue indefinitely, as when a
service is to be provided
forever, its present value is called its capitalized value.
Capitalized costs:
The present value of annual costs is called the capitalized cost.
Generally P is needed at
present to meet a payment of R every year forever with an interest rate of i.
P = R
i
Example, how much money (i.e., what is
the capitalized cost) is needed to meet an
annual payment of $600, when the interest rate is 6 percent?
P = $600/0.06 = $10,000