This paper presents an algorithm CAPFACT to evaluate the reliability of a capacitated two terminal network such as a communication network, a power distribution network, and a pipeline network. The network is good(working) if and only if it is possible to transmit successfully the required system capacity from one specified terminal to the other. This paper defines new Capacitated series-parallel reduction to be applied to a series-parallel structure of the network. New Capacitated factoring method is applied to a non-series-parallel structure. The method is based on the factoring theorem given by Agrawal and Barlow. According to the existing studies on the reliability evaluation of the network that the capacity is not considered, the factoring method using reduction is efficient. The CAPFACT is more efficient than Aggarwal algorithm which enumerated and combined the paths. The efficiency is proved by the result of testing the number of operations and cpu time on FORTRAN compiler of VAX-11/780 at Hanyang University.