Which term is equal to replacement cost minus depreciation?

Which term is equal to replacement cost minus depreciation?

• A. Actual Cash Value
• B. Replacement Cost
• C. Market Value
• D. Agreed Value

Answer: (A)

Actual Cash Value is the amount you get when you subtract depreciation from replacement cost. Replacement cost is the current cost to replace the item with a new one, while depreciation accounts for wear, age, and obsolescence. So, RC minus depreciation equals Actual Cash Value, which reflects the item’s current economic value at the time of loss. This differs from replacement cost (which would reimburse the full new replacement cost), market value (price to sell the item in the market), and agreed value (a pre-agreed amount for the item).

Actual Cash Value is the amount you get when you subtract depreciation from replacement cost. Replacement cost is the current cost to replace the item with a new one, while depreciation accounts for wear, age, and obsolescence. So, RC minus depreciation equals Actual Cash Value, which reflects the item’s current economic value at the time of loss. This differs from replacement cost (which would reimburse the full new replacement cost), market value (price to sell the item in the market), and agreed value (a pre-agreed amount for the item).