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Investment appraisal techniques

Project abandonment

During a post-completion appraisal, it may be realised that the project is
not likely to be so profitable as first thought, and the possibility of
abandoning it or terminating it early should be considered.

Abandoning the project is only necessary when the net discounted
expected future cash flow of the project becomes negative.

To value an option, compare the expected NPV without abandonment
with the expected NPV with abandonment.

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