Enter the original cost of an asset or item, annual depreciation, and the life of the asset into the calculator to determine the residual value.
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Residual Value Formula
The following formula is used to calculate a residual value.
RV = C - (C*D*A)
- Where RV is the residual value ($)
- C is the original cost of the item ($)
- D is the annual depreciation ($)
- A is the age of the asset (years)
To calculate the residual value, subtract the total depreciation from the original cost of the item.
Residual Value Definition
A residual value is defined as the total worth of an object or asset after a certain time period of use has passed. This is typically used when describing depreciating assets like cars or appliances.
Example Problem
How to calculate residual value?
- First, determine the original cost of the asset.
For this example, we will look at a car that was purchased for $50,000.00.
- Next, determine the annual depreciation.
In this case, the car is not used often and kept in good condition, so the annual depreciation is only 6%.
- Next, determine the age of the asset.
The car in this example problem has been owned for 5 years.
- Finally, calculate the residual value.
Using the formula above, the residual value is calculated as:
RV = C – (C*D*A)
RV = $50,000 – ($50,000*(6/100)*5)
RV = $35,000.00.
