Answer to Question #266458 in Microeconomics for Mike

Question

Q. Which factor amount formula is applied evaluate Annual Equivalent Worth?

(i) Equal payment series capital recovery amount

(ii) Single payment compound amount

(iii) Single payment present worth amount

(iv) None of the above

Answer 1

(i)

Equal payment series capital recovery amount.

You first find the net present worth of the original series of equal annual payments and then multiply this amount by the capital recovery factor.