Enter the recovery rate and the book value of an asset into the calculator to determine the estimated recovery value (ERV).

## ERV Formula

The following formula is used to evaluate the estimated recovery value.

ERV = RR * BV

• Where ERV is the estimated recovery value
• RR is the rovery rate (%)
• BV is the book value (\$)

## ERV Definition

What is ERV?

ERV, short for estimated recovery value, is a metric used to describe the total amount of value a company could extract from another asset that is undergoing a liquidation event such as a company going bankrupt.

The book value is also considered the net present value of an asset and a recovery rate is a percentage of an asset that can be recovered during the liquidation event.

## Example Problem

How to calculate ERV?

1. First, determine the book value of the asset or company.

For this example, we will look at a single asset to make the calculation simple. In this case, the book value of the asset is found to be \$40,000.00.

2. Next, determine the recovery rate.

During a liquidation event, the recovery rate of this asset is expected to be 85% because it can be sold on the open market.

3. Finally, calculate the estimated recovery value.

Using the formula above, the ERV is calculated to be:
ERV = RR * BV
ERV = .85 * \$40,000
ERV = \$35,000.00.