Document Type
Article
Date of Original Version
2018
Department
Finance
Abstract
The abandonment option under various capital budgeting models are discussed in this manuscript to bring forth the notion that present value of cash flows is often improperly estimated in the financial models utilized in the decision analytic process. In this study, Intellectual Property Rights and other intangible assets often are not considered in accounting estimation processes utilized in financial accounting. A decision maker often utilizes misestimates of the present value of cash flow resulting in less than optimum capital budgeting decisions. Decisions to abandon for salvage and other similar decisions improve when the present value of intangibles and property rights are included in the decision process. This last statement is the goal of this study and to present well founded processes to improve abandonment and similar decisions in capital budgeting decisions. The estimation problem in financial accounting is included in the analysis to accomplish this goal.
Citation/Publisher Attribution
Jarrett, J. E. (2018). Analysts’ Forecasts, the Abandonment Option and Intellectual Capital. International Journal of Accounting and Financial Reporting, 8(4), 370-383. doi: 10.5296/ijafr.v8i4.13825
Available at: https://doi.org/10.5296/ijafr.v8i4.13825
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.