In other words, it is the cost to replace with new product/goods, less depreciation
Actual cash value=Replacement cost-Depreciation
It is mostly used in insurance companies to find out the fair value to be paid to policyholders considering the cost of replacing those goods at today’s price and the depreciation cost of the damaged goods.
Suppose a policyholder X had insured his car worth 10000$ with XYZ insurance company and after a year the car met with an accident and got damaged. Now the present replacement cost for buying the same car is 10000$ but the car has been used for a year and depreciation cost is 1000$.So now the actual cash value comes out to be 9000 $(10000-1000).