The formula to calculate the Estimated Recovery Value (ERV) is:
\[ ERV = \frac{RR}{100} \times BV \]
Where:
ERV, short for estimated recovery value, is a metric used to describe the total amount of value a company could extract from another asset that is undergoing a liquidation event such as a company going bankrupt. The book value is also considered the net present value of an asset and a recovery rate is a percentage of an asset that can be recovered during the liquidation event.
Let's say the recovery rate (RR) is 50%, and the book value (BV) is $200,000. Using the formula:
\[ ERV = \frac{50}{100} \times 200,000 = 100,000 \]
So, the Estimated Recovery Value (ERV) is $100,000.
