Capex formula

CFA Level I
#1

Capex =current PP&E - PP&E from last period + depreciation expense for the period. Why do we add depreciation expense back?

my reasoning says substrac it, because:

capex = current PPE - depreciation expense on t - PPE from last period (which already has a substraction of depreciation expense for t-1)

thanks in advance

#2

Your reasoning is amiss:

Beginning PP&E + Capex − Depreciation Expense = Ending PP&E

Capex = Ending PP&E − Beginning PP&E + Depreciation Expense

1 Like