Expected Value
Expected value (EV) is the anticipated average value for your investment at a point in the future. It’s an average—weighted by probability—of every possible value, i.e. the value you should expect after you consider every possible outcome and assign each outcome with a likelihood. It’s also referred to as mean value.
What Is Expected Value?
In finance, investors calculate—using events and their probabilities—the expected value of a possible investment. They’re evaluating its statistical worthiness before committing to that investment, and often, calculating and comparing the expected values of multiple investments.
Your analysts calculate expected values in scenario analysis. The probabilities in your calculations are informed by objective information and assumptions, which give more accurate data to your analysts for their budgets and forecasts, and to your organizational leaders for their data-driven planning.
Analyze your investments’ expected values with this free What-if Analysis Template for Excel.
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