The Estimated Recovery Value (ERV) Calculator helps determine the amount of money that can be recovered from an asset after a loss, default, or financial event. This calculator is widely used in credit risk management, bankruptcy proceedings, lending decisions, insurance settlements, and asset-based financing. It plays a critical role in assessing potential losses and setting expectations for recovery efforts.
By estimating how much value can be regained from a distressed asset, the ERV calculator supports better decision-making for financial institutions, investors, insurers, and legal professionals. It simplifies complex recovery calculations by applying a standard recovery rate or using the Loss Given Default (LGD) metric for more accurate risk-adjusted evaluations.
Formula of Estimated Recovery Value (ERV) Calculator
Main ERV Formula:
ERV = Asset Value × Recovery Rate
Where:
ERV = Estimated Recovery Value
Asset Value = original or book value of the asset
Recovery Rate = estimated portion of the asset’s value that is recoverable (expressed as a decimal)
Alternative Form Using Loss Given Default:
Recovery Rate = 1 − Loss Given Default (LGD)
ERV = Asset Value × (1 − LGD)
For example, if an asset is worth $100,000 and the LGD is 60%, then:
Recovery Rate = 1 − 0.60 = 0.40
ERV = $100,000 × 0.40 = $40,000
This formula provides a clear, standardized method to estimate potential returns from non-performing or impaired assets.
Helpful Reference Table
This table provides estimated recovery values for common asset values and recovery rates.
| Asset Value | Recovery Rate | Estimated Recovery Value |
|---|---|---|
| $10,000 | 30% (0.30) | $3,000 |
| $25,000 | 40% (0.40) | $10,000 |
| $50,000 | 50% (0.50) | $25,000 |
| $75,000 | 60% (0.60) | $45,000 |
| $100,000 | 70% (0.70) | $70,000 |
This reference allows for quick estimation without detailed calculations, which is useful during negotiations, legal evaluations, or loan risk assessments.
Example of Estimated Recovery Value (ERV) Calculator
Imagine a lender has issued a loan backed by commercial property valued at $200,000. Due to default, the lender now estimates that only 45% of the value can be recover through sale or restructuring.
Step 1: Convert percentage to decimal:
Recovery Rate = 45% = 0.45
Step 2: Apply the ERV formula:
ERV = $200,000 × 0.45 = $90,000
Result: The lender can expect to recover approximately $90,000 from the asset.
If using Loss Given Default instead, and LGD is 55%, the same result is calculate:
Recovery Rate = 1 − 0.55 = 0.45
ERV = $200,000 × 0.45 = $90,000
Most Common FAQs
ERV is use to estimate how much value can be regain from a defaulted asset. It is essential in credit risk modeling, loan provisioning, and recovery forecasting.
Recovery rates are based on historical data, market analysis, collateral condition, legal environment, and type of asset. Financial institutions often use industry benchmarks or their own loss history.
Yes. A higher recovery rate means more value can be recover, reducing financial losses. However, higher recovery rates usually correlate with higher-quality collateral or stronger legal recovery processes.