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.
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.
The ACV formula is given below:-
ACV = `r * (e - c) / e`
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:-