Interest Calculation Formula

You calculate interest during construction—Allowance for Funds Used During Construction (AFUDC)—to capitalize the cost of company funds that are used over the course of a project. Interest is calculated based on this formula:

Interest During Construction = (Cost Accumulation*) × (Periodic Interest**)

*Accumulated costs based on a specified method of accumulation.

**Yearly interest rate divided by the number of periods in the fiscal year.