- Actual Cash Value:
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- What does Actual Cash Value mean?
ACV is a measure of the current value of a depreciating asset. It takes into consideration the original cost of the item, it's age and life expectancy.
Actual Cash Value is used by an insurance company to find the current valuation of an insured property such as a car or home. They use it to determine how much money needs to be paid for a damaged property.
- How to calculate ACV?
ACV is calculated by subtracting the depreciation from the replacement or original cost of the item. The depreciation is usually calculated by estimating a useful or expected life of the item and calculating what percentage of that life remains.
- Actual Cash Value Formula
The ACV formula is given below:-
ACV = `r * (e - c) / e`
Where:-
- r = purchase price of item
- c = current age of item years
- e = expected life of item years
- Example
Actual Car Value Calculator
Suppose you bought the 718 Boxster S for $71,400 two years ago. Assuming, the life expectancy of the car is 8 years
To know how much your car is worth right now, you can calculate it's Actual Cash Value as follows:-
- `r * (e - c) / e`
- `71400 * (8 - 2) / 8`
- `71400 * 6 / 8`
- `428400 / 8`
- ACV = `53,550`
History
- Feb 23, 2019
- Calculation formula breakdown
- May 20, 2018
- Tool Launched
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