What is savage value?

Answer 1

Salvage value is the estimated market value that an asset would fetch if sold at the end of the asset's useful life. Salvage value is used as an end-point for depreciation calculations.

For example, say that a wheelbarrow is used for everyday duties. The wheelbarrow was purchased at the beginning of the fiscal year for $200 and has a useful life of five years. As an astute business person, you decide that you will be able to get $25 for the wheelbarrow after five years.

At this point, assuming the purchase was right at the beginning of the fiscal year:

* Own an asset worth $200 with a five-year life

* The asset will be worth $25 at the end of its useful life

* Yearly depreciation expense is $200 - $25 = $175 / 5yrs = $35 per year