A sofa purchased 5 years ago for $2,000 has been destroyed by a tornado. It is 60%...
A sofa purchased 5 years ago for $2,000 has been destroyed by a tornado. It is 60% depreciated. Today the same sofa costs $2,250. If a homeowner files a claim for the lost sofa, how much would the insurer pay, assuming there is no deductible?
Homework Answers
Answer:
Cost of Same Sofa today S=2250
Depreciation D =60%
Actual cash basis
Insurer will pay = S*(1-D)=2250*(1-60%)=$900
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