Average value method

The mean value method is a method that is used in the context of company valuation. With her the Earned value viewed as the correct value in the form of the future success value. However, it is characterized by considerable uncertainty, especially with regard to possible competition that may arise due to favorable profit opportunities.

Calculation of the mean value method

This latent risk of competition is taken into account in the mean value method by calculating the arithmetic mean from the future success value and the partial reproduction value:

U = EW + RW / 2

U - company value
EW - Earnings value as future success value
RW - (partial) Reproduction value


The necessity of the equal inclusion of the earnings value and partial reproduction value in the calculation of the enterprise value can be justified by the fact that the price of a good is determined by the benefit to be derived from the good and the production costs required for the production of this good.

Halving both values is often rejected as too schematic and instead the consideration of the particularities of the individual case is required by special weighting of both factors.

Was the explanation to "Average value method"Helpful? Rate now:

More explanations too