Capital recovery factor

It is also important to be able to relate regular periodic payments to their present worth; for example, what monthly installments will pay for a $10,000 car in 3 yr at 15 percent?

Substituting the compounding equation F =P(F/P, i, N) in the sinking fund equation,

A = F (A/F, i, N), yields

A = P(F/P, i, N)(A/F, i, N)

And, substituting the corresponding interest factors gives

In this equation, the interest expression is known as the capital recovery factor, since the equation defines a regular income necessary to recover a capital investment. The symbolic equation is

A = P(A/P, i, N)