Enter the purchase price of an item, its current age, and the expected lifetime of the item into the calculator. The calculator will evaluate the current actual cash value of the item.
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Actual Cash Value Formula
The following equation is used to calculate the actual cash value of an item.
ACV = P × (E – C) / E
- Where ACV is the actual cash value ($)
- P is the purchase price of the item or current cost for replacement
- E is the expected life of the item in years
- C is the current life in years
Actual Cash Value Definition
An actual cash value is an estimated value of an item in its current state based on its expected lifetime and replacement cost. For example, if a car is expected to last 20 years, and it has a certain purchase price, the actual cash value would be the ratio of its current years to the original purchase price minus the replacement cost.
Actual Cash Value Example
How to calculate an actual cash value?
- First, determine the cost of a replacement.
Determine the total cost of replacing the item with an equivalent quality item.
- Next, determine the expected life span.
Measure or determine the expected life span of the item.
- Next, determine the current life.
Measure or calculate the current number of years the item has been in use.
- Finally, calculate the actual cash value.
Using the formula above, calculate the actual cash value.
An actual cash value is a measure of the value of an item after taking into account depreciation and the cost of a replacement.