PFIN 3rd Edition by Lawrence Gitman,Michael Joehnk,Randall Billingsley

Exercise 4

Sarah Kavenna's luxurious home in in Washington, D.C., was recently gutted in a fire. Her living and dining rooms were completely destroyed, and the damaged personal property had a replacement value of $27,000. The average age of the damaged personal property was 5 years, and its useful life was estimated to be 15 years. What is the maximum amount the insurance company would pay Sarah, assuming that it reimburses losses on an actual cash-value basis?