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Abandonment Value

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Abandonment Value
The value of a project or asset if it were immediately liquidated. Also referred to as the liquidation value.

Notes:
The abandonment value is generally a cash value, or equivalent, associated with an asset. This value is important for companies when analyzing the profitability of particular projects or assets and deciding whether they should be maintained.



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The introduction of abandonment value concept in capital budgeting is an important contribution in capital budgeting theory during this period.
If its value in place (the net present value of remaining cash flows) falls below its abandonment value (the amount that could be obtained through sale or other disposal), the asset should be abandoned and an impairment realized.
 
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