The Principle of Substitution is the situation where the value of an asset is determined by the cost of acquiring an equally desirable substitute. The Principle of Substitution forms the basis for the market approach to business valuation by asserting that the maximum value of a business entity or asset is determined by the cost of acquiring an equivalent replacement asset. The assumption, therefore, is that a buyer will not pay more for an asset than the cost of a comparable asset on the market.