What it is:
Abandonment value refers to the value of a project or investment were it to be liquidated presently.
How it works (Example):
Why it Matters:
A given project's abandonment value can be an important consideration for a company. Should the company learn that not only is a project not profitable but has also incurred costs, it may be more beneficial to liquidate the project for its abandonment value (if the net present value of future cash flows is less).