The capitalized cost (CC) is the total cost of an asset, including the initial cost (IC) and the present value of the maintenance costs (MC) over its useful life, discounted at the interest rate (R). This metric is used to evaluate the total cost of ownership of an asset.
The formula to calculate the capitalized cost (CC) is:
\[ CC = IC + MC \left(\frac{1}{R/100}\right) \]
Where:
Let's say the initial cost (IC) is $10,000, the maintenance cost (MC) is $500 per year, and the interest rate (R) is 5%. Using the formula:
\[ CC = 10000 + 500 \left(\frac{1}{5/100}\right) = 10000 + 500 \times 20 = 10000 + 10000 = 20000 \text{ dollars} \]
So, the capitalized cost (CC) is $20,000.
Definition: This formula calculates the capitalized cost of an asset.
Formula: \( CC = IC + MC \times \left( \frac{1}{R/100} \right) \)
Example: \( CC = 10000 + 500 \times \left( \frac{1}{5/100} \right) \)
Definition: This formula helps in finding the capitalized cost of an asset.
Formula: \( CC = IC + MC \times \left( \frac{1}{R/100} \right) \)
Example: \( CC = 15000 + 600 \times \left( \frac{1}{4/100} \right) \)
Definition: Capitalized cost refers to the total cost of acquiring and preparing an asset for use, including purchase price, installation, and other related expenses.
Definition: This formula helps in capitalizing costs associated with an asset.
Formula: \( CC = IC + MC \times \left( \frac{1}{R/100} \right) \)
Example: \( CC = 20000 + 700 \times \left( \frac{1}{6/100} \right) \)
Definition: Capitalizing a cost means adding the cost of an asset to the balance sheet rather than expensing it immediately. This spreads the expense over the useful life of the asset.
Definition: Costs that are capitalized include purchase price, installation costs, transportation fees, and any other expenses necessary to prepare the asset for use.
Definition: Capitalized cost is the total cost incurred to acquire and prepare an asset for use, which is then added to the balance sheet and depreciated over time.
Definition: To capitalize a cost means to record it as an asset on the balance sheet, spreading the expense over the asset's useful life through depreciation or amortization.
Definition: Capitalised cost refers to the total expenditure incurred to acquire and prepare an asset for use, which is then recorded on the balance sheet and depreciated over time.
Definition: Costs that can be capitalised include purchase price, installation costs, transportation fees, and other expenses necessary to bring the asset to a usable state.
