Question

The value of shares from the Intrinsic Value method is 20 and the value of shares from the yield basis method is Rs 22.5. Calculate
the value of shares using Fair Value method​

Answer 1

Given :-  Intrinsic Value = 20

yield value = 22.5

Formula :-  $Fair Value = (Intrinsic value + Yield value)/2$

∴ Fair value = $\frac{20+22.5}{2}$ = 21.25

           

Answer 2

Fair Value represents the estimated worth of an asset or liability and is often used to gauge the true value of an asset. It is a method of share valuation that is determined by the mean of value derived from the Intrinsic Value Method and value derived from the Yield Value Method. This method provides a better representation of the value of shares than the other two methods.

Fair Value = (Intrinsic Value + Yield Value) ÷ 2

As per the question

Intrinsic Value = 20

Yield Value = 22.5

Fair Value = (20 + 22.5) ÷ 2

= 21.25