What is the formula for calculating 'actual cash value'?

The formula for calculating 'actual cash value' is defined as replacement cost minus depreciation. The concept of actual cash value represents the value of property at the time of loss, taking into account not just the cost to replace the property, but also how much value it has lost over time due to wear, tear, or obsolescence.

Replacement cost refers to the amount it would cost to replace the damaged or lost property with a new item of comparable quality and utility. However, as items age, they typically depreciate, which affects their overall value. By subtracting this depreciation from the replacement cost, you arrive at the actual cash value, which provides a more accurate representation of the property's worth at the time of the loss.

Other formulas provided in the alternative choices do not accurately reflect how actual cash value is determined. For instance, appreciation would not be included in this context since actual cash value measures a decrease in value over time, not an increase. Similarly, market value and deductibles are not components of the actual cash value calculation in this specific context.