How to Calculate Capitalized Cost

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Calculating a capitalized cost is an effective way to determine the long-term overall cost of a product, investment or service. This calculation can be used by consumers and businesses to project future costs and liabilities. The only downside to this method is it requires a lot of data collection in order to predict trends and long-term investment costs.

Things You'll Need

  • Maintenance cost for the period
  • End of period salvage data
  • Capital gains estimate for the period, positive or negative
  • Upfront capital costs
  • Loan interest costs
  • Calculator
  • Determine the period, and length of time you want to use to calculate the capitalized cost. Gather all the data for the determined period, and have the final numbers readily accessible.

  • Add the final salvage value with the capital gains. This is the final profit.

  • Add the upfront costs, maintenance and any total loan interest for the period. This is the final cost.

  • Deduct the final profit from the final cost. The result is the capitalized cost for that particular financial transaction for the period in question.

References

  • Photo Credit Jupiterimages/Photos.com/Getty Images
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