Actual Cash Value Calculator

Formula

The formula to calculate the Actual Cash Value (ACV) is:

\[ ACV = P \times \frac{E - C}{E} \]

Where:

$ ACV $ is the Actual Cash Value ($)
$ P $ is the Purchase Price or Current Cost for Replacement ($)
$ E $ is the Expected Life of the Item (years)
$ C $ is the Current Life of the Item (years)

What is Actual Cash Value?

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.

Example Calculation

Let's assume the following values:

Purchase Price (P) = $20,000
Expected Life (E) = 20 years
Current Life (C) = 5 years

Using the formula to calculate the Actual Cash Value:

\[ ACV = 20000 \times \frac{20 - 5}{20} = 20000 \times 0.75 = 15000 \text{ dollars} \]

The Actual Cash Value is $15,000.