Great answer! Allow me to add something: if I recall correctly, in game it's actually calculated step by step, and not using Method 1. On every step, the value is rounded. What this means is that for a higher number of equipment, even Method 1 may result in slightly wrong values. Nothing nearly as bad as method 2, but it's something to keep in mind if you ever come across a different theoretical and practical number. I'm afraid I don't know the exact order used by the game, however.