book 5 page 89 says : “notice that capital expenditures have been broken down into two components: the reinvestment of Depreciation, and new (or net) capital expenditures that are proportional to the growth in sales. The depreciation line and the reinvestment of depreciation line cancel each other algebraically.” is the Reinvestment of Depreciation the money the firm spend on fixing old machines?
Basically yes. The firm needs to maintain its current level of assets (by reinvesting depr.) and then adding even more to support any sales growth.
Thats the exact same question that haunted me and a buddy of mine (also on the forum) when Schweser quietly went ahead and cancelled the Depreciation and ReinvestedDepreciation on page 396 and with the smallest unreadible font wrote a note that they cancel each other for good. But Nirj’s explaination makes sense now.
thanks… nirj for the explanation