capex/gross PPE+capex

CFA Level I FRA
#1

Hello all, I am confused by this explanation:

"“Capex divided by the sum of gross PPE plus capex can suggest what percentage of the asset base is being renewed through new capital investment.”

Why do you have to add capex to PPE in the denominator? I would do capex/gross PPE only (without adding capex) because I think capex for the period is already included in gross PPE . Let me know what you all think. E

#2

Presumably that’s beginning-of-period gross PP&E, so gross PP&E + capex = end-of-period gross PP&E.

#3

understood. thank you, sir.

#4

My pleasure.