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Abstract

Projects have a defined beginning, yet the points at which they should be terminated are not clear, even if failure of the project is clear due to lack of funds, decrease in sales or due to change in government policy. Project termination is the last phase of any project life cycle indicating that the project must be phased out from organizational activities. The time period when a failed project is terminated from the market is important to a firm, as termination of a project could have an effect on the market value of firm and could also affect the future prospects of projects of that firm. The challenge faced by the decision makers is, determining the time when to terminate a project without affecting the market value of the firm after the decision makers have concluded that the project has failed. This research paper presents an economic model that could act as guiding tool for the decision maker on when to terminate a project without affecting the firm value. The model will assist users to estimate the time by when the failed project needs to be terminated and will also give the decision maker an insight on whether termination of the project would affect the market value of the firm or not.

Keywords

Project termination, market value of the firm, project failure time, failed project.

Literature Review

In the project management literature, project termination is considered to be a part of any project lifecycle, and it is impossible to eliminate this phase [1]. 'Organizing a project's termination process is especially important when it has failed because of the lasting impact on future project as well as the organization's image'[1, p45]. Because of the impression that a project leaves on a company's name it is necessary to have a successful project termination. For a successful project termination, the termination phase needs to be planned and budgeted, but this may not happen in a premature project closure [2]. 'A premature project closure can occur during any phase of the project life cycle, the initiation, development or implementation phase' [2, p92].

The time at which a project is terminated from an organization activity is given much importance as termination could affect the company's reputation [1],[3]. Determining...

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