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Voltage drop is the reduction in voltage as current flows through a conductor. Every conductor has resistance, and that resistance causes a voltage loss proportional to the current and the run length. The NEC doesn't mandate voltage drop limits as a hard rule — but Informative Annex B and 215.2(A)(4) FPN state a 3% maximum on branch circuits and 5% combined on feeders plus branch circuits as recommended values.
The formula comes from Ohm's Law applied to conductor resistance. K is the resistivity constant for the material — 12.9 for copper, 21.2 for aluminum (in ohm-circular mils per foot). CM is the cross-sectional area of the conductor in circular mils. For single-phase circuits, the factor of 2 accounts for the return current path. For three-phase, 1.732 (√3) accounts for the phase relationship.
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