BU393 Lecture Notes - Lecture 8: Free Cash Flow, Operating Cash Flow, Capital Expenditure
Document Summary
Nett = nett-1 depreciationt + capext. Nett = net fixed assets at the end of year (net property, plant, and equipment) Net fi(cid:454)ed assets is the aggregate (cid:271)ook value of all of the (cid:272)o(cid:373)pa(cid:374)(cid:455)"s assets. Capex is the purchase price of new assets. Capex represents the addition to fixed assets. Declining balance depreciation system an accelerated depreciation system where the amount of depreciation charged to an asset declines over time. The amount of depreciation in any period is calculated as the depreciation rate multiplied by the book value of the asset. Depreciationt = dr * (nett-1 + capext: dr = depreciation rate. Capex can be divided into two parts: maintenance capex = the assets that are purchased to replace worn out equipment, growth capex growth capex are the assets that must be purchased in order to grow sales. Total capex = nett nett-1 + depreciationt.
