WIX Archives

Cost is known , value is perceived

Posted by bdk on Thu Oct 24, 2002 08:18:23 PM

In reply top Real Value / Imaginary Value posted by Christer on Thu Oct 24, 2002 07:15:55 PM

The costs are fixed and known (upon completion of a project, assuming you have kept track of them). The value depends on supply and demand which can be affected by current market conditions.

Upon sale, the cost is redefined at that time for the new owner.

Over 10 years for example, if I paid $15k for a new car, $5k over the term of the loan in interest, $3k in maintenance, $5k in fuel, and $4k for insurance- my cost is $32k. I would be lucky still to sell this car after 10 years for $4k (the value). If it turns out to be rare and desireable, I might be able to sell it for $30k. Even then its value is less than my cost.

And then there is the time value of money... Oy! I have a headache already...

: Peter, I see what You mean.
:
: I?ve invented two terms, Real Value and Imaginary Value.
:
: The Real Value is easy to calculate, you just add the cost
: s and get a total.
:
: The Imaginary Value is more difficult because it depends o
: n many factors, the RV seemingly not one of them, at least
: not decisive.
: Other factors are; rarity, historic significance, demand o
: n the market and, the most important, the general economic
: situation.
: This would mean that if you acquire a warbird project and
: rebuild it, it?s like making an investment on the stock ex
: change. At a low you?ll have to bide your time or loose mo
: ney!?
:
: Christer
: (probably boring a few people)

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