A capital recovery factor is the ratio of a constant annuity to the present value of receiving that annuity for a given length of time.
Using an interest rate i, the capital recovery factor is:
is the number of annuities received.
With an interest rate of i = 10%, and n = 10 years, the CRF = 0.163.
This means that a loan of $1,000 at 10% interest will be paid back with 10 annual payments of $163.
[2] Another reading that can be obtained is that the net present value of 10 annual payments of $163 at 10% discount rate is $1,000.
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