ArticlePDF Available

CapX = Depreciation Is Unrealistic Assumption for Most Terminal Values

Authors:
  • Sutter Securities Financial Services, San Francisco

Abstract

This article discusses the fallacy of assuming that depreciation should equal capital expenditures in a perpetual growth model.
Presentation
Full-text available
Topics: 1. The perpetual growth rate and firm mortality 2. The relationship between capital expenditures and depreciation 3. The appropriate treatment of amortization 4. Projections, normalization, and steady state growth 5. The trend toward using lower long-term growth rates 6. The relevance of multiples for terminal value
Presentation
Full-text available
This presentation examines several factors that impact terminal value and how to address them: (i) the final year of the projection, (ii) the trend toward using lower long-term growth rates, (iii) the “perpetual” growth rate and firm mortality, (iv) the use of multiples for terminal value, (v) the relationship between capital expenditures and depreciation, and (vi) the appropriate treatment of amortization
Presentation
Full-text available
Topics: 1. The perpetual growth rate and firm mortality 2. The relationship between capital expenditures and depreciation 3. The appropriate treatment of amortization 4. Projections, normalization, and steady state growth 5. The trend toward using lower long-term growth rates 6. The relevance of multiples for terminal value
Presentation
Full-text available
This presentation discusses (i) the relationship between capital expenditures and depreciation; (ii) the appropriate treatment of amortization and other limited life items in a terminal value calculation; and (iii) how changes in the Tax Cuts and Jobs Act of 2017 regarding tax rates, net operating losses, interest deductions, and depreciation write-offs can affect DCF analyses.
ResearchGate has not been able to resolve any references for this publication.