what is residual value 
the residual value also known as salvage value is the estimated value of a fixed asset at the end of its lease term or useful life in lease situations the lessor uses the residual value as one of its primary methods for determining how much the lessee pays in periodic lease payments as a general rule the longer the useful life or lease period of an asset the lower its residual value investopedia joules garciaunderstanding residual valueresidual value formulas differ across industries but its general meaning what remains is constant in capital budgeting projects residual values reflect how much you can sell an asset for after the firm has finished using it or once the asset generated cash flows can no longer be accurately predicted for investments the residual value is calculated as the difference between profits and the cost of capital in accounting owner s equity is the residual net assets after the deduction of liabilities in the field of mathematics specifically in regression analysis the residual value is found by subtracting the predicted value from the observed or measured value 