Question 1 of 13
Walk me through how you would calculate actual cash value when replacement cost is $5,000 and supported depreciation is $1,400. What does the $3,600 result represent?
Strong Interview Answer
Using the replacement-cost-less-depreciation method stated in the scenario, ACV is $5,000 − $1,400 = $3,600 before any deductible. The depreciation is subtracted from replacement cost; it is not part of the replacement-cost payment itself.
What to Listen For
- $3,600 ACV
- replacement cost minus depreciation
- deductible applied separately after valuation
- no double-counting depreciation
Caution
Do not describe replacement cost as including depreciation; depreciation is the reduction used to reach ACV when this valuation method applies.