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Capitalized value


The capital sum at current rates of interest required to yield the current earnings of an asset. For example, if the earnings of an asset were £5 per annum and the appropriate rate of interest were 5 per cent, its capitalized value would be £1OO. Capitalized value does not represent a satisfactory means for the valuation of most capital assets, since the capitalized value of an asset would not necessarily compensate an owner for the loss of the asset.

Reference: The Penguin Dictionary of Economics, 3rd edt.