Net Realizable Value (NRV)
What is Net Realizable Value (NRV)?
How Does Net Realizable Value (NRV) Work?
Let's assume Company XYZ needs to get rid of a widget maker. It expects to sell the asset for $10,000. It must pay a broker $600 for help in the sale, $50 in legal paperwork costs and $200 to deliver the asset to the buyer. Thus, Company XYZ's net realizable value on the asset is:
$10,000 - $600 - $50 - $200 = $9,150
Analysts sometimes incorporate the future cash inflows associated with the assets and calculate the present value of the cash inflows and outflows in order to determine NRV.