"Fair value of shares is in fact not precisely fair but a compromise effort for bringing the parties to an agreement, just like providing extra play time in a Hockey or Football match especially in case of a tie". Justif

There is no mathematically accurate formula of valuation. An element of guesswork or arbitrariness is involved in valuation though it is possible to calculate book value, market value averaging quoted prices for a period. The following four factors have to be kept in mind in the valuation of shares: Capital cover, Yield, Earning capacity, and Marketability However, efforts are made to ascertain fair value just like extension of play time in Hockey or Football in case of tie even in extra time. Valuation based on fair value is appropriate when market value of a company is independent of its profitability. Dividing the aggregate of values obtained through net assets method and yield method is the process to arrive at fair value. In another way the following well-known methods are applied to get fair value: The manageable profits basis method or the earning per share method; The net worth method or the break-up value method; and The market value method. The fair value of a share is the average of the value of shares obtained by the net assets method and the one obtained by the yield method. This is, in fact not a valuation, but a compromise formula for bringing the parties to an agreement.