Angela Leichner\'s luxurious home in Georgetown, a neighborhood in Washington, DC, was
recently gutted in a fire. Her living and dining rooms were completely destroyed, and the
damaged personal property had a replacement price of $26,000. The average age of the damaged
personal property was 8 years, and its useful life was estimated to be 11 years. What is the
maximum amount the insurance company would pay Angela, assuming that it reimburses losses
on an actual cash-value basis? Round the answer to two decimal places.
Solution
maximum amount the insurance company would pay will be for straight line depreciation and
hence it will pay
26000 * (11-8) / 11 = $7090.91
recently gutted in a fire. Her living and dining rooms were completely destroyed, and the
damaged personal property had a replacement price of $26,000. The average age of the damaged
personal property was 8 years, and its useful life was estimated to be 11 years. What is the
maximum amount the insurance company would pay Angela, assuming that it reimburses losses
on an actual cash-value basis? Round the answer to two decimal places.
Solution
maximum amount the insurance company would pay will be for straight line depreciation and
hence it will pay
26000 * (11-8) / 11 = $7090.91
