Title

An abandonment decision model

Document Type

Article

Date of Original Version

1-1-1973

Abstract

A project is useful if the present value of all future net cash flows is greater than its abandonment value; otherwise the project is retired or sold prior to the end of its useful life. 1 Abandonment value emanates from several sources including (1) knowledge of the salvage or price paid to the firm upon liquidation of the investment, and (2) the correlation between future revenue collections and the salvage value. 2 The purpose of this paper is to incorporate uncertainty into the decision process for finding the optimal time to abandon a project. © 1973 Taylor & Francis Group, LLC.

Publication Title

Engineering Economist

Volume

19

Issue

1

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