What it is:
Liquidation value refers to the value of a project or investment if it were to be sold or abandoned immediately.
How it works (Example):
Why it Matters:
A project's liquidation value can be an important consideration for a company's capital budget. Should the company learn that a project is not profitable and never will be, it can be beneficial to liquidate the project if the net present value of future cash flows is less than the liquidation value.