Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Course Subjects
  • Our Team
  • Home
  • Economics, Finance, & Analytics
  • Business Finance, Personal Finance, and Valuation Principles

Abandonment Value - Explained

What is Abandonment Value?

Written by Jason Gordon

Updated at April 16th, 2022

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What is Abandonment Value?How Does Abandonment Value Work?

What is Abandonment Value?

An abandonment value refers to the cash value earned on a project after it has been abandoned or discontinued. A project or an asset can be abandoned (liquidated or sold) if its net present value of expected cash flow is lower than the amount received for salvage. Hence, the value of the asset after it has been sold or liquidated is its abandonment value. Quite a number of factors determine the abandonment value that could be attributed to a project after it has been liquidated or sold. For instance, liquidity, fair value appraisals, supply and demand factors can affect abandonment value.

Back to:BUSINESS & PERSONAL FINANCE

How Does Abandonment Value Work?

The cash value or its equivalent that an asset yields after it is discontinued or abandoned refers to abandonment value. Certified appraisers often conduct periodic appraisals of assets in an investment market, this is to determine the profitability or loss attributed to the assets. If an asset is profitable, there is no need to abandon it, if otherwise, it can be sold or liquidated. When assets are liquidated, they are returned to the investor in cash value or its equivalent, this is the abandonment value. When the executives of a company perceive that an asset will not be profitable, they lack the desire to maintain it. In a situation like this, the asset will be sold at distress or at a liquidation price, the amount realized from the sale or liquidation is the abandonment value.

abandonment value

Was this article helpful?

Yes
No

Related Articles

  • Book Value and Adjusted Book Value Methods - Explained
  • Startup Business Funding - Explained
  • Leveraged Buyback - Explained
  • Characteristic Based Ratios - Valuation



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions
  • Course Material

Definition by Author

0
0
Expand