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What is Liquidation Value?

Liquidation value refers to the value of a project or investment if it were to be sold or abandoned immediately.

How Does Liquidation Value Work?

Also called abandonment value, the liquidation value of a project or investment is the immediate value in cash that would be generated from liquidating a project or selling an investment.

Why Does Liquidation Value Matter?

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.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.