There is no single right way, since value varies business by business, and also according to the time line of the business: for  example, an amount fair to buy out one owner of a three member gym business is very different than the amount to fairly buy out, even at any early time in the company's history, a Microsoft founder.Your methodology seems a reasonable one--investment, plus interest, plus some value for the time she put in. At the end of the day, however, since there is no official or single legal formula, whatever the three of agree to is fine. If you need outside help, try contacting a CPA with experience in valuing business.