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Art Vault
Cengage
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By Nivine Richie

The value of an investment can be determined several different ways:

  1. Comparing the investment with similar investments that have recently changed hands
  2. Determining what it would cost to replace the item
  3. Adding up the costs of all the components used to create the asset

In some markets, one method is more appropriate than another. For example, in real estate, method #1 above is most popular. The downside, of course, is that comparable investments must be easily identified and they must have changed hands recently. Otherwise, there's no way to identify the proper appraisal value. In other markets, building the asset from the ground up is the only way to identify its value.

The video below discusses the market for some valuable works of art.

For discussion:

  • How would you determine the value of a unique piece of art?
  • What resources would you use?
  • Would you invest in art if you had the money?
  • How would you determine it was worth investing?