A Note on Abandonment Value and Capital Budgeting

Bernard Schwab and Peter Lusztig

Journal of Financial and Quantitative Analysis, 1970, vol. 5, issue 3, 377-379

Abstract: In a recent article, Professors Robichek and Van Horne have noted the importance of considering abandonment in the capital budgeting process. The basic point of their paper is that:… a project should be abandoned at that point in time when its abandonment value exceeds the net-present value of the subsequent expected future cash flows discounted at the cost-of-capital rate.

Date: 1970
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