salvage value

Definition

The estimated value of an asset at the end of its useful life, before you actually try to sell it and discover it's worth much less. Also called residual value by optimists who think depreciation schedules reflect reality.

Example Usage

We assumed a salvage value of $10,000 for the equipment, but the scrapyard offered us $200 and a sympathetic look.

Origin

Maritime insurance terminology dating to the 17th century, originally referring to cargo recovered from shipwrecks

Fun Fact

Tax authorities and companies often disagree wildly on salvage values, since higher estimates reduce depreciation expense and increase reported profits.

Source: Asset depreciation methodology

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